Planning Class 12 Notes

Planning is the primary function of the management and the thinking function, and the chapter opens with its definition and with the characteristics that make it what it is.

• Planning is looking ahead, and it is the primary function of the management because every other function depends on it, and the organising, the directing and the controlling all begin from the plan.
• It is a thinking function, because it is the process of deciding in advance what is to be done, how it is to be done, when it is to be done and by whom, and the deciding takes place in the mind before the action begins.
• It is a continuous process, because the plan has to be revised as the environment changes, and the new plan replaces the old one, so it is a cycle and not a single act.
• It is a primary function, and it is the parent of the other functions, because the structure, the staffing, the direction and the control are all planned first.
• It is an intellectual exercise, because it requires the analysis of the situation, the setting of the objectives, the evaluation of the alternatives and the selection of the best one, and it takes time.
• It is a continuous and a dynamic process, because the environment in which the firm works is always changing, and the plan must be adapted to it.
• It aims at the objective, and the planning is always directed at the objective, and the objective is the starting and the ending point of the plan.
• The importance of the planning: the planning provides a framework for the decision making, it reduces the risk of the uncertainty, it helps in the coordination and in the communication, it reduces the overlapping of the activities, it provides the basis for the control, and it promotes the innovative and the creative thinking.

The limitations are given so that the two columns of the merits and the demerits can be written, and each limitation is a consequence of one of the features.

• Planning based on the assumptions: the planning is made on the assumptions about the future, and the assumptions may be wrong, and if they are, the whole plan fails.
• Planning is a static process: the plan is a fixed document made at a point of time, so it cannot be changed by itself, and it becomes outdated as the situation changes.
• Planning is a rigid process: once the plan is prepared it is not easy to change, because the changes involve the money, the time and the effort already spent, and the commitment of the organisation prevents the quick adjustment.
• Planning is done by the top management: since the lower level is not consulted, the plan may not reflect the ground realities, and the commitment to the plan may be weak at the lower level.
• Planning does not itself guarantee the success: the plan may be perfectly sound and the implementation may still fail, because the plan is only the intention and not the action.
• Planning creates a rigidity in the organisation, and it may resist the change, and the cost of the revision of the plan makes the management reluctant to revise it.
• The limitations of the planning do not mean that the planning is not useful, because the alternative is the decision taken without a plan, which is a decision taken on the guess, and the far greater danger.

The classification of the plans is the part of the chapter that carries the most marks, because it supplies a standard set of comparisons, and each pair must be written in two columns.

• Objectives, policies, strategies and procedures run from the most general to the most specific, and the objective is the end, the policy is the general guideline, the strategy is the plan for the competition, and the procedure is the detailed step.
• The standing plans are the plans that apply to the recurring situations and they are made by the top management and are not altered for each occasion, and the single use plans are the plans for the particular situation that arise once, and they are made by the lower management and are altered as the situation changes.
• The long term plans, also called the strategic plans, are the plans for a period of more than five years, and they are made by the top management, and the long term objective of the business is the long term plan, while the short term plans are the plans for a period of less than one year and they are made by the lower management, and the short term objective is the short term plan.
• The long term plans are the plans for the growth of the business, the introduction of a new product, the new plant or the entry into a new market, and the short term plans are the plans for the daily operations, the budget and the manpower, and the long term plans are less flexible and the short term plans are more flexible.
• The functional plans and the comprehensive plans divide the plans by the part of the business that they cover, and the functional plans relate to one function such as the finance, the marketing, the production or the personnel, while the comprehensive or the overall plan relates to the business as a whole, and a functional plan is not the same thing as a single use plan, since a function may be the subject of a standing plan as well as of a single use plan.
• The budgetary plans and the non-budgetary plans divide the plans by whether they are expressed in terms of the money, and the budgetary plans are the plan of the income, the cash, the production and the sales in the money terms, while the non-budgetary plans are the schedules, the programmes and the policies that are not expressed in the money.

The syllabus names eight types of plan in a single list, and the list runs from the most general to the most rigid, so the whole of it can be memorised as one descending line of the freedom that is left to the person who carries it out.

• The objective is the end and not the means, and it is the statement of what is to be achieved, and it is the most general of the eight, and it leaves the greatest freedom, since it says nothing about how the end is to be reached.
• The policy is a general guideline for the action, and it is the rule of conduct that the managers must follow while pursuing the objectives, and it is broad and it leaves a considerable discretion, and the standing plan of a firm is largely made up of the policies.
• The strategy is the plan that states how the firm proposes to compete with its competitors in the market, and it is drawn for a particular competitor and a particular market, and it is more specific than the policy because it names the rival it is aimed at.
• The procedure is the detailed step by which the plan is to be implemented, and it is the most specific of the eight in its detail, and it is a standing plan, and it leaves almost no discretion to the person who follows it.
• The method is the one particular way in which a task is to be performed, and it is narrower than the procedure, and it is also a standing plan, and the difference between a procedure and a method is that a procedure says what is to be done and a method says exactly how it is to be done.
• The rule is a rigid plan, and it is a standing plan, and it does not allow any discretion at all, and a rule is normally expressed in the negative, in the form of what is not to be done, and the example is the rule that no person below the rank of the manager may sanction a purchase above a stated amount.
• The budget is the statement of the figures, and it is the single use plan in which the figures are expressed in the money, and it is both a standing plan, as the annual budget, and a single use plan, as the budget for a particular project, and a budget without a period is meaningless.
• The programme is the schedule of the actions, and it is the time-bound sequence in which the steps of the plan are to be taken, and it is a single use plan, and it is narrower than the budget in that the budget carries the money and the programme carries the time.

The process of planning is given as a sequence of six steps, and it is examined both as a sequence and as a set of comparisons, because the steps fall into two groups.

• The first step is the setting of the objectives, which is the starting point of the planning, and the objectives must be clearly stated and they must be translated into the specific targets.
• The second step is the identification of the alternatives, and there are always more alternatives than one, and the alternatives are the courses of action open to the management, such as the continuation of the existing course, the modification of the existing course and the new course.
• The third step is the evaluation of the alternatives, which is a technical process, and each alternative is examined against the suitability, the adequacy and the acceptability, so the whole plan rests on this step.
• The fourth step is the selection of the alternative, and the best one is chosen, and the choice is a decision, and it is here that the objective, the policy, the strategy and the procedure are decided.
• The fifth step is the implementation of the plan, which begins after the plan has been drawn and the decision has been taken, and it means putting the plan into action, and the plan becomes effective only when the implementation begins, so a plan that is drawn is not yet a plan that is working.
• The sixth step is the follow up, which is the review and the evaluation of the plan after it has been implemented, and it is the process by which the management sees whether the plan has produced the expected result.
• The steps may be grouped as the four steps before the decision, which are the objectives, the identification, the evaluation and the selection, and the two steps after the decision, which are the implementation and the follow up, and the examiner often asks for this grouping.
• The process is a cycle, since the follow up of the plan produces the information for the revision of the objectives, and the planning therefore continues.

The chapter closes with the nature of the planning as it differs with the size, the type and the level of the organisation, and this is a short and frequently asked comparison.

• In a small business, the planning is informal, because there is little separation between the owner and the manager, and the plans are drawn by the owner himself, and the plans are short term and the flexibility is high because the communication is direct.
• In a large organisation, the planning is formal, because the work is divided among the managers at the three levels, and the plans are drawn by the managers at the level concerned, and the plans cover the long term, and the flexibility is limited by the rigid structure.
• In a stable organisation, where the environment changes little, the plans are detailed and fixed, and in a dynamic organisation, where the environment changes quickly, the plans must be flexible and short term so that they can be revised.
• The degree of the formality, the length of the time period, the flexibility and the level of the management that draws the plan are the three variables that explain the difference, and the small firm is the opposite of the large firm on all three.

A plan is a set of decisions that have already been taken, and a decision is a choice between the alternatives, so the relationship between the planning and the decision making is the relationship between the general and the particular.

• The decision making is the process of selecting a course of action from the available alternatives, and it is the core of the planning, because the identification, the evaluation and the selection of the alternatives are all the steps of the decision making.
• A decision is a rational process, so it requires the identification of the problem, the collection of the information, the identification of the alternatives, the evaluation of the alternatives, the selection of the best one and the implementation of the decision.
• The alternatives are of three kinds, the mutually exclusive alternatives in which one choice excludes the other, the conjunctive alternatives in which all the alternatives must be taken, and the continuous alternatives in which the amount can be varied within a limit.
• The decisions may be taken under conditions of certainty, in which the outcome is known, of risk, in which the probabilities are known, or of uncertainty, in which neither the outcome nor the probabilities are known, and the planning is at the centre of this classification.
• The relationship: the planning is the framework of the decision making, since it sets the objectives and the constraints within which the decisions are taken, and the decision making supplies the content of the plan, since a plan is nothing but a record of the decisions that have been taken.
• The difference: the plan is a systematic and a continuous view of the whole, and the decision is a single and a discrete choice, so a plan contains many decisions, and a single decision without a plan is taken in isolation and is not linked to the objective of the firm.