Determining objectives and outlining the courses of action needed to achieve these objectives is referred to as the planning process. The actual steps in the process of planning are difficult to specify for all organizations because of wide differences in size and complexity.
Process of Planning
These are the following steps of the process of planning briefly explained below:
- Determination of Objectives
- Determining Policy and Programmes
- Search for Alternative Ways
- Evaluation of Alternative Ways and Selection
- Formulating Derivative Plans
- Determining Schedule and Procedure of Work
Determination of Objectives
Planning is an important function of management in which the first step is to determine objectives for the whole organization and then for each sub-unit. In a true sense, planning is preparing to achieve some objectives. If objectives are not determined then there is nothing to plan. Therefore determining objectives is the first step in the planning process.
Objectives may be in form of quantity, for example, producing 20,000 T.V. sets or capturing 10% of the market share in laptops etc. There may be other objectives like profit, sales, extension, entry in new field etc. out of these objectives which are to be achieved that is determined. In this way determination of objectives is the first step of the planning process.
Forecasting is a true attempt to predict future outcomes based on past events and management insight. Of course, planning is for the future and it is a blueprint of the future course of action to activate desired objectives. Hence forecasting is the function of prediction of future environmental assumptions.
Therefore assumptions are an important step in planning. Correct assumptions or forecasting leads to accurate decisions about future courses of action. In short by forecasting we can assume favourable and unfavourable situations. So without forecasting making a plan is a difficult task. This is the second step involved in the planning process.
Determining Policy and Programmes
This is the third step in the planning process. In the planning function policies and programmes are necessary to decide. Policies are determined in light of the objectives of an organization. There are different policies of an organization, like purchase, sales, production, marketing, finance, price, advertisement, personnel etc.
All these policies are determined for a specific duration and the programme is decided. A programme is an action plan in which the fulfilment of objectives is the ultimate goal. Programmes are determined according to departments and levels of management.
As well as in which sequence functions are to be carried is decided and as per the situations programmes are changed. In short in this step policies and programs are determined.
Search for Alternative Ways
This is the fourth step of the planning process. In order to achieve objectives there is a number of alternatives available in the environment for example undertaking a campaign for growth in sales or reducing price or quality improvement.
Therefore suitable alternative way is required to select from which the organization’s objectives are fulfilled, of course selecting a suitable alternative requires imagination, foresight and talent while selecting a suitable alternative manager has to evaluate the merits and demerits of each alternative.
Evaluation of Alternative Ways and Selection
After searching for suitable alternatives the next step in the planning process is the evaluation of alternative ways and selection. As it is stated above in the fourth step to improve sales there are many alternatives available like undertaking an advertising campaign or reducing prices without disturbing quality or increasing quality.
Therefore evaluation is the function of the comparative study of the merits and demerits of these alternatives. After a comparative study of various alternatives and having weighted merits and demerits the final stage is making a decision as to which alternative is to be selected.
This is the step or point of decision-making. When more than one alternative is equally good then the planner may decide the fit one is selected.
Formulating Derivative Plans
After the main plan has been formulated the major goals must be translated into day-to-day operations called derivative plans. In order to achieve the objectives of the main plan; derivative plans are formulated for example plan for purchasing physical resources, in which the purchase of machinery, the purchase of raw materials and the purchase of other materials are included.
As well as such a plan is also prepared for human resources, which includes an employee recruitment plan, selection plan, employee training plan etc. Thus after determining derivative plans which help the main plan fulfil the work.
Derivative plans are also useful to determine the procedure of the department. In short in this step, various plans are prepared separately for different departments, sections and units.
Determining Schedule and Procedure of Work
This is the seventh step in the planning process. In which schedule and procedure are determined. Time is very important for planning when to start the work and when to be completed work. Within which time every work will get complete.
All this is scheduled for early and easy fulfilment of objective. As well as the sequence of activity is also determined in this step for successful implementation. So this is as called the procedure of work.
After determining the schedule and procedure of the work the next step is budgeting. A budget is a statement of income and expenses for a specific period. The budget for various periods and departments can be prepared to give meaning to plans and for the successful execution of plans.
The master budget of an organization represents the sum total of income and expenses, along with desired profit, and balance sheet items like cash and capital expenditures. Therefore without budget planning will be meaningless.
This is the final step in planning. After consideration of overall plans and derivative plans, they are brought into implementation follow-up means checking the performance of activities as per the plan. So there must be a provision to verify the actual work is being executed and results are received at each stage perfectly as per the plan.
And if there are some derivations between actual work and planned work, corrective actions are taken immediately. This is called a follow-up or review of the plan.
Features of Planning
On the basis of the above definitions, the features of planning are as follows:
- Planning is the fundamental function of management. While doing any activity a manager needs to have the proper plan first.
- Planning is goal-oriented. Planning establishes the goals of an organization and decides how best to achieve them.
- Planning by nature is a pervasive function of management because it relates to all levels of management.
- Planning is an intellectual process because it involves forecasting, decision making and thinking of future-specific courses of action. This needs to have talent.
- Planning is an ongoing process of an organization, it means it is a continuous process.
- Planning helps to improve the efficiency of the business.
- Planning is a function of decision-making.
- Planning is an activity of future courses of action.
- Planning is such a function, which directs all the concerned elements of an organization to achieve goals.
Types of Planning
The types of planning are classified on the basis of nature, type of business, objectives duration and size. Organizational plans are roadmaps to attain organizational goals. Thus in order to attain different types of organizational goals, an organization has to adopt different types of plans. Such plans are shown in the following chart:
On the Basis of Nature
Following are the types of planning on the basis of nature:
A strategic plan is a plan which is prepared by top management and the Board of directors. A strategic plan deals with how the organization is going to utilize its resources in order to attain its strategic goals. Usually, these plans cover a longer time period of five to fifteen years.
Under this plan, they decide the major goals and policies of an organization. While developing this plan they have to consider all the internal factors and the risk involved in it.
Strategic plans are concerned with the determination of strengths and weaknesses, mission and control system to implement of plans of an organization as well as it deals with the assessment of objectives in the light of changing environment. Hence strategic planning is a system of deciding overall objectives and policies in order to fulfil those objectives.
These plans are developed to attain the tactical objectives of the organization. The tactical plans are also called functional plans. To develop tactical plans middle managers are in need of detailed reports about finance, operation, market and external environment to get strategic objectives.
A tactical plan provides the proper idea for executing the strategic plan. These plans are made for a short time span and narrow scope, then strategic plans. Thus tactical plans relate to the process of making decisions about what to do, who is going to do it and how to do it.
These plans are prepared by lower-level management for the short term. That is for one year. The supervisor or foreman is concerned with day to day work of their team and related to implementing such plans. In order to achieve long-term goals the short-term goals are decided for which these plans are made.
Supervisions set standards, workout schedules, day-to-day progress reports, and proper plans of resources. The supervisors present and interpret the plans to their higher management as they apply them to their unit. Operation plans help the tactical plan. It is a tool in the hand of the supervisor to implement day-to-day, weekly and monthly activities.
Hence the operational plans are detailed and specific. Usually, they are concerned with functional aspects of production, finance, personnel, machinery and equipment.
On the Basis of Time
Following are the types of planning on the basis of time:
This plan is prepared for the business mission and vision. This plan supports and directs executives to reach their goals. Such a plan is made for 5 to 15 years or more than 15 years. Capital investment plans for future expansion plans for manger or amalgamation plans for designing and constructing plants and buildings etc are examples of long-term plans.
There are some medium-term plans prepared for the medium-term goals of an organization. They are made for a period of 6 months to 2 years. The departmental heads, functional managers and production line managers of the middle management are conducting these plans. In an organization, intermediate plans are many times used for campaigns.
When plans are prepared for a particular period say for a week, a month or for a year then they are termed short-term plans. In other words when planning is for a short period then the plan is called a short-term plan. This plan is also known as the tactical plan.
It is concerned with available resources only and deals with the current operations of the organization. Inventory plan, “Plan for control, plan for employee training, and work method are examples of short-term plans.
On the Basis of Use
Following are the types of planning on the basis of use:
Single Use Plan
The plan which is used for one-time only is called a single-user plan. This plan is a specific plan. Under this type, programmes are prepared in conformity with the objectives and made up of policies, procedures, schedules, budgets etc. A programme involved all necessary activities for accomplishing assigned objectives.
Such a plan is called a single-use plan. A plan of opening two branches in different parts of town, a training program for employees for deputation and acquiring a new line of business etc. are examples of this plan.
The plan is prepared once and it is repeatedly used. This plan is called the standing plan. It is also called a frequent-use plan. Such a plan is a long-term plan. So the plan which is used frequently in similar conditions is called a standing plan. A standing plan is very much useful to solve difficulties which are again and again occurring.
This plan includes objectives, policies, procedures, methods, rules and strategies. Such plans are useful to executives to minimize their workload. These plans frequently help managers. So it is a standing guide to solving the difficulties of an organization.
FAQ Related to the Process of Planning
What is the Process of Planning?
The following is the process of planning:
1. Determination of Objectives
3. Determining Policy and Programmes
4. Search for Alternative Ways
5. Evaluation of Alternative Ways and Selection
6. Formulating Derivative Plans
7. Determining the Schedule and Procedure of the Work
What are the types of planning?
We can categorise types of planning on this three basis:
1. On the Basis of Nature: 1. Strategic Plan, 2. Tactical Plans, 3. Operational Plans
2. On the Basis of Time: 1. Long-Term Plan, 2. Intermediate Plans, 3. Short-term Plan
3. On the Basis of Use: 1. Single Use Plan, 2. Standing Plan