PROCESS OF PLANNING
Planning is a process that involves the setting up of the business objectives and allocation of resources for achieving them. Planning determines the future course of action for utilizing various resources in a best possible way. It is a combination of information handling and decision making systems based on information inputs, outputs and feedback loop.
The following are the steps in the process of planning:
- ANALYSIS OF BUSINESS ENVIRONMENT
Before planning for the future, proper analysis of the business environment should be made. The business environment can be divided into two parts: External environment or Internal environment. External environment includes:
- Legal environment
- Political environment
- Technological environment
- Demographic environment
- Sociological environment
- Economic environment, etc.
Every organization has to prepare the plan according to the changing trends in the external environment.
Internal environment includes:
- Resources available etc.
The analysis of the internal environment is also known as Resource Audit. Resource audit means analysis of the strength and weaknesses of an organization. Due consideration is made on the availability of resources, profitability, plant capacity, available manpower, communication effectiveness and the like.
- GATHERING NECESSARY INFORMATION
Before actual planning is initiated relevant facts and figures are collected. All information relating to operations of the business should be collected in detail. The types of customers to be dealt with, the circumstances under which goods are to be provided, should be studied in the detail. The facts and figures collected will help in framing realistic plans.
- LAYING DOWN OBJECTIVES
The objectives of the organization are pre-planned. Objectives specify the results expected. Once the organizations’ objectives are determined, then section-wise or department-wise objectives are planned at lower level. Defining the objectives of every department is a very essential one; then only clear cut direction is available to the departments. Control process is very easy if the objectives are clearly defined.
- DEVELOPING PLANNING PREMISES
Planning is forward looking. Therefore, planning is based on forecasting. Forecasting means the assumption of and the anticipation of certain events. It implies calculation of how certain factors will behave in future. The planning must consider the likely behaviors of these factors. In this sense, these constitute the planning premises. Generally forecasting is made in following ways:
- What will be the market force? Market force refers to the demand, supply and the buying behavior etc.
- The expectation of volume of sales.
- What kind of products are to be sold and in what price?
- What would be their manufacturing costs?
- What would be the tax policy and economic policy of the government?
- The expectation of technology changes in production.
- How is the finance raised for expansion and/ or modernization of the business?
- IDENITIFICATION OF ALTERNATIVES
An action may be performed in many ways but a particular way is most suitable to the organization. Hence, the management should find alternative ways and examine them in the light of planning premises. The list of alternatives is shortlisted on varied basis and remaining alternatives are sent for evaluation.
- EVALUATION OF ALTERNATIVES
Evaluation means assessing the alternative courses on basis of the profitability, size of investment, gestation period, total life of the project etc. While evaluating the available alternatives, all logical and technical aspects are considered. Large numbers of contradictory factors having direct effect on the accuracy of the evaluation makes it a very difficult process. This has led to the development of new or more sophisticated techniques of planning and decision making.
According to KOONTZ AND O’DONNELL
“There is seldom a plan made for which reasonable alternatives do not exist. Moreover, before weighing alternatives and reaching a decision, one is wise to search for alternatives that may not be immediately apparent. Quite often an alternative does not immediately prove to be the most profitable way of undertaking a plan.”
- SELECTING THE BEST POSSIBLE ALTERNATIVE
Put of the alternatives available, best possible alternative is taken out. This is the actual stage of decision making in the process of planning. In case of new projects, this step is very crucial as the new projects involve huge investments.
- FORMULATION OF ACTION PROGRAMMES
The term action programme includes the time limit for performance, allocation of work to individuals and work schedule. These are necessary to achieve the objectives within specified period.
- IMPLEMENTATION OF PLAN
The planning should be put into action so that business objectives may be achieved. The implementation will require establishment of policies, procedures, standards and budgets etc. These tools will enable better implementation of plans.
- FOLLOW-UP AND EVALUATION
This is the last step in the process of planning. There should a proper system of follow-up. The management should watch how the planning is being implemented. The shortcomings should be noted down and then rectified. It means actual performance is to be compared with the standard performance and necessary corrective action is to be taken.