Planning: definition, importance and limitations

Definition of planning

Planning means settling beforehand the work to be done and the way of doing it, and every manager performs it as a basic function. More fully, it means setting objectives for a given period, working out the different courses of action that could achieve them, and choosing the best of these. It bridges the gap between where an organisation stands today and where it wants to be, and because it involves a choice among alternatives it is closely tied to decision making. Planning comes before the other functions, which are carried out within the framework the plans lay down, and it is done at every level, from the top to supervisors' day-to-day plans.

Importance of planning

1. It sets the standards for control. Control asks whether results match what was intended, and that question needs a target to compare against. The plan supplies the target, so a shortfall can be spotted and put right; with no plan there is nothing to check against, which is why controlling depends on planning being done first.
2. It reduces the risk of uncertainty. Planning cannot stop the future from changing, but it makes the manager think about it early: likely changes are identified in advance and a response is ready before they arrive.
3. It gives direction. A plan settled in advance tells every department and every employee where effort should go. Without one, each would follow its own idea of what matters, and their efforts would pull against one another.
4. It encourages new ideas. Because planning is the manager's first function, it is the stage at which a new idea has to be worked out in concrete terms: what will be done, by whom and by when.
5. It helps decision making. A plan rests on targets and on forecasts of the conditions ahead; these give the manager a basis for weighing the possible courses of action and picking the one that can actually be carried out.
6. It avoids overlapping and waste. When the work of every department is laid out in one plan, each knows what the others are doing, so two units do not do the same job, confusion is avoided and activities that serve no purpose are dropped.

A Pune maker of electric-scooter parts that plans its output for the coming year against a sales forecast knows what each shop must produce, can order cells and motors early, and can see within a month if it is falling behind.

Limitations of planning

1. It does not guarantee success. A plan delivers only when it is well made and then put into effect. A manager who reuses an old plan simply because it succeeded once may grow complacent, and that misplaced confidence can itself lead to failure.
2. It may fail in a changing environment. The economic, political, legal and social conditions in which a firm works do not stand still, and a plan drawn up under one set of conditions may have to be redrawn under another. If, say, the purchase subsidy on electric scooters were cut in the middle of the year, the Pune parts maker's sales forecast, and every budget built on it, would have to be revised.
3. It can make an organisation rigid. A detailed plan fixes what is to be achieved and by when, and managers bound by it may feel unable to depart from it even after circumstances have changed.
4. It costs money and time. Preparing a plan uses up money and managers' time: information has to be collected and verified, and meetings and outside experts have to be paid for, and these costs can be larger than what the plan gains. A plan that takes too long to finalise also leaves too little time in which to carry it out.
5. It may reduce creativity. Where plans are drawn up at the top and everyone else only executes them, middle managers and staff have little room to use their own initiative or try something new.

Conclusion

On balance, these limitations argue for planning with care, not for giving it up. A plan that is kept flexible and reviewed as conditions change still gives managers the soundest available footing for choosing their next course of action, even though it cannot solve every problem by itself.