Big picture
Planning is deciding in advance what to do and how to do it. It bridges the gap between where we are and where we want to be.
It is the first function of management, and every other function depends on it: you organise resources to carry out a plan, staff positions the plan needs, direct people towards the plan, and control by comparing results with the plan. Exam questions ask you to identify a feature, a step in the process, or a type of plan from a short case.
Learning goals
Explain the concept and features of planning.
Explain the importance and limitations of planning.
Describe the steps in the planning process.
Distinguish single-use and standing plans.
Identify and distinguish the eight types of plans: objective, strategy, policy, procedure, method, rule, programme and budget.
Core ideas
1. Features of planning
Feature | Meaning |
|---|---|
Focuses on achieving objectives | Plans are made to achieve definite goals; planning is purposeful |
Primary function of management | It comes first and lays the base for all other functions |
Pervasive | It is needed at all levels: top managers plan for the whole firm, supervisors plan daily output |
Continuous | Plans are made for a period; when it ends, new plans are needed |
Futuristic | It looks ahead, using forecasts |
Involves decision-making | It means choosing the best among alternatives |
A mental exercise | It needs foresight, imagination and sound judgement; it is thinking before doing |
2. Importance of planning
Provides direction: everyone knows what to do and how.
Reduces the risk of uncertainty: managers anticipate changes and prepare for them.
Reduces overlapping and wasteful activities: clear plans coordinate departments and avoid confusion.
Promotes innovative ideas: managers have to think of new ways to reach goals.
Facilitates decision-making: it evaluates alternatives and chooses the best.
Establishes standards for controlling: the plan gives the targets against which performance is measured.
3. Limitations of planning
Limitation | Explanation | Example |
|---|---|---|
Leads to rigidity | Managers may stick to the plan even when the situation changes | A sales team keeps to last year's plan despite a new competitor |
May not work in a dynamic environment | The environment changes faster than plans can predict | A sudden change in import rules makes the plan useless |
Reduces creativity | People follow the plan instead of thinking of new ideas | Middle managers only carry out top-level plans |
Involves huge costs | Gathering data, experts and meetings are expensive | Market research for a new product launch |
Is time-consuming | Little time may be left for implementation | Lengthy planning delays a response to a competitor |
Does not guarantee success | A plan worked before may not work again; over-confidence is dangerous | A strategy that succeeded last year fails this year |
4. The planning process
Setting objectives: what the organisation wants to achieve. Example: increase sales by 20% this year.
Developing premises: assumptions about the future, based on forecasts (demand, interest rates, government policy, competition). All managers should use the same premises.
Identifying alternative courses of action: list different ways to reach the objective (new product, price cut, more advertising).
Evaluating alternative courses: weigh the positive and negative points of each.
Selecting an alternative: choose the most feasible, profitable and least risky option, or a combination.
Implementing the plan: put it into action through organising and other functions.
Follow-up action: monitor whether the plan is being carried out and is working, and correct it if needed.
5. Single-use and standing plans
Basis | Single-use plans | Standing plans |
|---|---|---|
Meaning | Developed for a one-time event or project | Used again and again for recurring situations |
Time period | Short; ends when the project ends | Long; used until revised |
Examples | Programme, budget | Policy, procedure, method, rule |
Scope | Narrow | Broad |
6. Types of plans
Type | Meaning | Example |
|---|---|---|
Objective | The desired future position; the end result, ideally measurable and time-bound | "Increase sales by 10% by 31 March" |
Strategy | A comprehensive plan for achieving objectives, considering the environment; includes the long-term direction, the course of action and the allocation of resources | Deciding to enter rural markets with low-priced sachet packs |
Policy | A general statement that guides thinking and decision-making within limits | "We sell only on cash terms"; "We recruit from campuses" |
Procedure | Routine steps, in chronological order, for carrying out an activity | Steps for admitting a patient in a hospital: registration, file, doctor, ward |
Method | The prescribed way of performing a specific task, often for one step of a procedure | Training new staff by on-the-job training rather than lectures |
Rule | A specific statement of what must or must not be done; no discretion, and a penalty for violation | "No smoking in the factory"; "Wear a helmet on the shop floor" |
Programme | A detailed statement about a project: objectives, policies, procedures, rules, tasks, resources and budget | A programme to launch a new product line in six months |
Budget | A plan expressed in numerical terms for a future period; also a control device | A sales budget of 50,000 units for the next quarter |
Distinctions examiners like
Policy and procedure: a policy is a general guide to thinking ("recruit through campuses"); a procedure is the sequence of steps to act ("advertise, shortlist, test, interview, appoint").
Procedure and method: a procedure is a series of steps; a method is the way one step is done.
Policy and rule: a policy leaves room for discretion; a rule leaves none, and breaking it carries a penalty.
Objective and strategy: the objective is where to go; the strategy is the overall route to get there.
A reliable approach to case-based questions
If the case states a measurable target with a deadline, it is an objective.
If it gives steps in sequence, it is a procedure; if it describes how one task is done, a method.
If it says "must not" with a penalty, it is a rule; if it is a general guide with room for judgement, a policy.
If it gives numbers for a future period, it is a budget; if it is a whole project with tasks and resources, a programme.
If it describes the overall approach to beat competitors or reach markets, it is a strategy.
For the process, match the case to the step: assumptions about the future are premises; comparing options is evaluating.
Connections that matter
Controlling compares actual results with the plan's standards; planning and controlling are inseparable twins.
Business environment supplies the information for planning premises.
Organising puts the plan into action.
Common mistakes
Confusing developing premises with setting objectives. Premises are assumptions about the future, not goals.
Calling a budget only a control device. It is a plan in numbers that is also used for control.
Treating policy and rule as the same. A rule allows no discretion.
Mixing up procedure and method.
Saying planning guarantees success.
Revision checklist
I can explain seven features of planning.
I can explain six points of importance and six limitations.
I can list and explain the seven steps of the planning process.
I can distinguish single-use and standing plans.
I can identify all eight types of plans in a case and distinguish the commonly confused pairs.