BBA Fundamental of Planning Study Material Notes
Table of Contents
BBA Fundamental of Planning Study Material Notes : Concept of Planning Features of Planning Nature of Planning Importance of Planning Pervasiveness of Planning An Open System Approach Steps in Planning Corporate Planning Operational Planning Functional Planning Difference Between Strategic Planning and Operational Planning Long Term Planning Short Term Planning Proactive Planning and Reactive Planning ( Most Important Notes for BBA I Semester Examination )
MCom I Semester Contemporary Change Issue Study Material Notes
Fundamental of planning
Management functions, as pointed out earlier, are classified as planning, organising, stalling, directing, and controlling. All these functions are required to achieve the objective of an organisation. However, without setting the objectives there is nothing to organise, direct, or control. Therefore, every organisation is required to specify what it wants to achieve. Planning is basically related with this aspect.
Concept of Planning
The meaning of the word ‘planning is something of a paradox. To some, it is an omnibus term having convenient utility and a generalised context extending from broad philosophical considerations to precise details. They think of it as specific activity: in contrast, others believe it is a part of, perhaps even a symbol for almost everything a person does. Then, too. the upsurge in planning has created many different kinds of planning, and this array of different entities, all identified by planning, has added to confusion. There are some who consider planning synonymous with decision making. This is also erroneous. Decision making is not the same as planning because one can make decisions in other activities also, though the role of decision making is highly important in planning.
Another confusion that arises in the concept of planning is the two words: planning and plan. Two words are similar but their meanings are different. There is fundamental difference between the two. Planning is an activity. It can be considered as consisting of a process, hence various sub-activities. On the other hand, plan is a commitment to a particular course of action believed necessary to achieve specific results. For example, Government of India prepares Five-Year Plans which consist of various actions to be taken, results to be achieved, and resources to be used. These are plans. The plans are prepared through the planning process which involves taking various activities to arrive at what is to be achieved, how to be achieved, and when to be achieved. Therefore, planning is taken as a process.
Planning as a process involves the determination of future course of action, that is why an action, what action, how to take action, and when to take action. These why. what, how, and when are related with different aspects of planning process. Why of action reveals that action has some objectives or the end-results which an organisation wants to achieve; what of action specifies the activities to be undertaken; how and when generate various policies, programmes, procedures and other related elements. Thus, all these elements speak about futurity of action. Terry has defined planning in terms of future course of action. He says that:
Thus, in planning, a manager uses facts, reasonable premises, and constraints, and from all these, he visualises and formulates what necessary activities are, how they will be conducted, and what will be their contribution to achieving desired results. McFarland has defined planning in terms of actions of anticipating, influencing, and controlling the nature and direction of change as he believes that the environment in which planning process is undertaken is too dynamic and changing. He defines planning as follows:
“Planning may be broadly defined as a concept of executive action that embodies the skills of anticipating, influencing, and controlling the nature and direction of change.”
Features of Planning
On the basis of the definition of planning. Its following features can be identified:
1 Planning is a process rather than behaviour at a given point of time. This determines the future course of action.
2. Planning is primarily concerned with looking into future. It requires forecast future situation in which the organisation has to function. Therefore, forecasting of future situation leads to correct decisions about future course of actions
3. Planning involves selection of suitable course of action. This means that there a several alternatives for achieving a particular objective or set of objectives. However all of them are not equally feasible and suitable for the organisation.
4. Planning is undertaken at all levels of the organisation because all levels of management are concerned with the determination of future course of action However, its role increases at successively higher levels of management. Moreover, planning at different levels may be different in the context that at the top management level, managers are concerned about the totality of the organisation and tries to relate it with the environment while managers at lower levels may be involved in internal planning.
5. Planning is flexible as commitment is based on future conditions which are always dynamic. As such, an adjustment is needed between the various factors and planning.
6. Planning is a pervasive and continuous managerial function involving complex processes of perception, analysis, conceptual thought, communication, decision, and action. The very pervasiveness of these planning elements makes it difficult to identify and observe them in detail.
NATURE OF PLANNING
The basic nature of planning may be understood in terms of it being a rational approach, open-system approach, and its pervasiveness.
Planning: A Rational Approach
Planning is a rational approach for defining where one stands, where one wants to go in future, and how to reach there. The concept of rationality denotes the choice of appropriate means for achieving stated objectives. In organisational context, planning as a rational approach tries to fill the gap between actual status (current performance) and desired status (desired performance) as shown in Figure
The difference between two time periods (T, and T,) may vary between short term, say one year or so, and long-term, say 5 years or so or even more depending on the degree of futurity which an organisation takes into account for charting out its plan. The current and desired status is usually expressed in terms of objectives which can be achieved by an action or set of actions. For completing an action, various types of resources-human as well as non-human-are required. The rational approach of planning emphasises the most appropriate use of these resources.
Planning: An Open System Approach
Planning adopts an open system approach. We have seen in Chapter 2 that an organisation is an open system. It takes inputs from the environment, processes these, and exports outputs to environment. The open system approach of planning indicates that the identification of gap between current status and desired status in future and the action required to bridge this gap is influenced by a variety of environmental factors-economic, political-legal, technological, socio-cultural, and competitive. These factors are dynamic and change with the time. Therefore, while adopting open system approach in planning, managers have to take into account the dynamic features of the environment.
Pervasiveness of Planning
Planning is pervasive and extends throughout the organisation. Every manager has a planning function to perform. This stems from the fact that he is a manager and that planning is a fundamental management function. However, the pervasiveness of planning is commonly overlooked and planning is frequently considered as being the function of toplevel managers. While it is true that they devote more of their time to planning and work with more vital issues than the managers of the middle and lower levels do, the fact remains that every manager has to perform planning within his particular area of activities. Top management is responsible for overall objectives and actions of the organisation. Therefore, It must plan what these objectives should be and how these can be achieved. Similarly, a departmental head has to devise the objectives of his department within the organisational objectives and also the methods of achieving these: a foreman has to devise the objectives of his shop and also how to achieve these. For example, budget, a part of plan in any organisation, is prepared at various levels. Each level contributes to the preparation of budget by contributing what his efforts will require in terms of allocation of resources and what his efforts will contribute in terms of results. Thus, planning activity goes in hierarchy as shown in Figure
Like all the levels of management, planning exists in all the organisations regardless or size or nature of activities. In large organisations, its presence is apparent que employees giving all or major portion of their time to planning efforts. For example, many large organisations have established separate corporate planning departments. Usually, in these cases, emphasis is given to such things as the allocation of available resources in the best manner to achieve basic goals and the courses of action for certain problems deemed most expeditious at the times and places. In small organisations, planning is commonly of a somewhat informal type. The owner/manager himself may do most of it. Relatively it is easy to plan for a small organisation because the objectives of such an organisation are simple; there are few people to deal with and the planning work itself is free from intricacy. Thus, planning is equally essential for the small and the large organisations.
IMPORTANCE OF PLANNING
Planning has assumed great importance in all types of organisations-business or nonbusiness, private or public sector, small or large, in developed countries or developing countries. The systems approach of management suggests interaction of an organisation with its environment on continuous basis. This interaction can better be maintained through efficient planning. In fact, in today’s context, the difference between successful and unsuccessful organisations is because of planning activities undertaken by these. The organisation which thinks much ahead about what it can do in future, is likely to succeed as compared to one which fails to do so. For example, Reliance Industries Limited has achieved phenomenal growth within a short period of time because of its ability to plan to take up new projects. In particular, planninig contributes in the following ways:
1 Primacy of Planning. Planning precedes all other managerial functions. Since managerial operations in organising, staffing, directing, and controlling are designed to support the accomplishment of organisational objectives, planning logically precedes the execution of all other managerial functions. Although all the functions intermesh in practice as a system of action, planning is unique in that it establishes the objectives necessary for all group effort. All other functions are performed to achieve the objectives set by the planning process. This can be presented as follows:
2. To Offset Uncertainty and Change. There is continuous change in the environment and the organisation has to work in accelerating change. This change is reflected in both tangible and intangible forms. Tangible changes are in the form of changes in technology, market forces, government regulations, etc. Intangible changes reflect in changes in attitudes, values, cultures, etc. In order to cope up with the requirements of such changes. organisation must look ahead for its future course of action which is basically provided by planning process. Planning does not stop changes in the environment but gears the organisation to take suitable actions so that it is successful in achieving its objectives.
3. To Focus Attention on Objectives. Planning focuses on organisational objectives and direction of action for achieving these objectives. Sometimes, people in the organisation may not be specific about its objectives because of lack of clarity and precise definitions. For example, often we take profit as the objective of a business organisation. It is too abstract to be pursued. In order to enforce managerial actions, this should be defined more precisely. When planning action is taken, these objectives are made more concrete and tangible. The objectives are defined in more meaningful terms so that managerial actions are possible. For example, even if the organisational objective is profit-earning, planning activity will specify how much profit is to be earned looking into all facilitating and constraining factors.
4. To Help in Coordination. Though all managerial functions lead to coordination in the organisation, real beginning is made at the level of planning stage. Well-considered overall plans unify interdepartmental activities and consequently restrict the area of freedom in the development of purely departmental plans. Thus, various departments work in accordance with the overall plan, and harmony is achieved. It is true to say that coordination is essence of management and planning is the base for it.
5. To Help in Control. Control involves the measurement of accomplishment of events against plans and the correction of deviations to assure the achievement of objectives as set by the plans. Thus, control is exercised in the context of planning action as standards against which actual results are to be compared are set up through planning. At the control stage, an attempt is made to monitor the performance on continuous basis so that immediate action is taken if anything goes wrong.
6. To Increase Organisational Effectiveness. Planning ensures organisational effectiveness in several ways. The concept of effectiveness is that the organisation is able to achieve its objectives within the given resources. Thus, for effectiveness, it is not only necessary that resources are put to the best of their efficiency but also that they are put in a way which ensures their maximum contribution to organisational objectives. In fact, this can be done by taking appropriate planning. Planning states the objectives of the organisation in the context of given resources. Therefore, each resource of the organisation has a specific use at a particular time. Thus, planning along with control ensures that resources are put in action in a way in which these have been specified. If this is done, organisation will achieve effectiveness.
Fundamental of Planning
STEPS IN PLANNING
It is not necessary that a particular planning process is applicable for all organisations and for all types of plans because the various factors that go into planning process may differ from plan to plan or from one organisation to another. For example, planning for a maior action will take more serious evaluation or various elements necessary for planning but this may not be true for a minor one. Similarly, in a small organisation planning rocess may not be taken in the same ways as in a large organisation. Here is given process of planning which is applicable for a major programme like opening of a new P une or acquisition of a maior plant. With minor modifications, the process is appica all types of plans. Planning process is presented in Figure
Fundamental of Planning
The sequences of various steps in planning are in such a way that they lead to the translation of an idea into action by reaching to the state of establishing of sequences of activities. Each stage contributes to plan formulation in the following ways:
1 Perception of Opportunities. Perception of opportunities is not strictly a planning process. However, this awareness is very important for planning process because it leads to formulation of plans by providing clue whether opportunities exist for taking up particular plans. From this point of view, it can be considered as the beginning of planning process. Perception of opportunities includes a preliminary look at possible opportunities and the ability to see them clearly and completely, a knowledge of where the organisation stands in the light of its strengths and weaknesses, an understanding of why the organisation wants to solve uncertainties, and a vision of what it expects to gain. This provides an opportunity to set the objectives in real sense because the organisation tries to relate itself with the environment. In doing so, it takes the advantages of opportunities and avoids threats. This is a preliminary stage, hence the analysis of environment is not taken in very elaborate form but analysis relates to the determination of opportunities at first instance. Once the opportunities are perceived to be available, the other steps of planning are undertaken.
2. Establishing Objectives. At this stage, major organisational and unit objectives are set. Objectives specify the results expected and indicate the end points of what is to be done, where the primary emphasis is to be placed, and what is to be accomplished by the various types of plans. The organisational objectives should be specified in all key result areas. Key result areas are those which are important for organisation in achieving its objectives. These are identified on the basis of organisational objectives. For example, for an organisation, key result areas may be profitability, sales, research and development, manufacturing. and so on. Once organisational objectives are identified, objectives of lower units and subunits can be identified in that context. Organisational objectives give direction to the nature of all major plans which, by reflecting these objectives, define the objectives of major departments. These, in turn, control the objectives of subordinate departments and so on down the line. Thus, there will be hierarchy of objectives in the organisation.
3. Planning Premises. After determination of organisational goals, the next step is establishing planning premises, that is, the conditions under which planning activities will be undertaken. Planning premises are planning assumptions the expected environmental and internal conditions. Thus, planning premises are external and internal External premises include total factors in task environment like political, social, technological, competitors’ plans and actions, government policies, etc. Internal factors include organisation’s policies, resources of various types, and the ability of the organisation to withstand the environmental pressure. The plans are formulated in the light of both external and internal factors. The more individuals charged with planning understand and utilise consistent planning premises, the more coordinated planning will be. Forecasung! plays a major role in planning premises.
The nature of planning premises differs at different levels of planning. At the top level, it is mostly externally focused. As one moves down the organisational hierarchy. the composition of planning premises changes from external to internal. The major plans, both old and new, will materially affect the future against which the managers at lower units must plan. For example, a superior’s plans affecting a subordinate manager’s area of authority becomes premises for the latter’s planning.
4. Identification of Alternatives. Based on the organisational objectives and planning premises, various alternatives can be identified. The concept of various alternatives suggests that a particular objective can be achieved through various actions. For example, if an organisation has set its objective to grow further, it can be achieved in several ways like expanding in the same field of business or product line, diversifying in other areas, joining hands with other organisations, or taking over another organisation, and so on. Within each category, there may be several alternatives. For example, diversification itself may point out the possibility of entering into one of the several fields. The most common problem with alternatives is not that finding of alternatives only but to reduce the number of alternatives so that most promising ones may be taken for detailed analysis. Since all alternatives cannot be considered for further analysis, it is necessary for the planner to reduce in preliminary examination the number of alternatives which do not meet the minimum preliminary criteria. Preliminary criteria can be defined in several ways such as minimum investment required, matching with the present business of the organisation, control by the government, etc. For example, one company has defined preliminary criteria in terms of size of investment in new project and may not consider any project involving investment of less than Rs. 40 crores.
5. Evaluation of Alternatives. Various alternatives which are considered feasible in terms of preliminary criteria may be taken for detailed evaluation. At this stage, an attempt is made to evaluate how each alternative contributes to the organisational objectives in the light of its resources and constraints. This presents a problem because each alternative may have certain positive points on one aspect but negative on others. For example, one alternative may be most profitable but requires heavy investment with long gestation period; another may be less profitable but also involves less risk. Moreover, there is no certainty about the outcome of any alternative because it is related with future and future is not certain. It is affected by a large number of factors making the evaluation work quite complex. This is the reason why more sophisticated techniques of planning and decision making have been developed. Such techniques will be described in a later chapter.
6. Choice of Alternative. After the evaluation of various alternatives, the most fit one is selected. Sometimes, evaluation shows that more than one alternative is equally good. In such a case, a planner may choose more than one alternative. There is another reason for choosing more than one alternative. Alternative course of action is to be undertaken in future which is not constant. A course of action chosen keeping in view the various planning premises may not be the best one if there is change in planning premises. Therefore, planner must be ready with alternative, normally known as contingency plan, which can be implemented in changed situations.
Fundamental of Planning
7. Formulation of Supporting Plans. After formulating the basic plan, various plans are derived so as to support the main plan. In an organisation there can be various derivative, plans like planning for buying equipments, buying raw materials, recruiting and training, personnel, developing new product, etc. These derivative plans are formulated out of the main plan and, therefore, they support it.
8.Establishing Sequence of Activities. After formulating basic and derivative plans, the sequence of activities is determined so that plans are put into action. Based on plans at various levels, it can be decided who will do what and at what time. Budgets for various periods can be prepared to give plans more concrete meaning for implementation.
Fundamental of Planning
Types of Planning
There may be several ways in which an organisation can undertake planning process though the basic steps involved remain the same in each way. Planning can be differentiated on the basis of coverage of organisational activities, importance of contents in planning process, time dimension in planning, approach adopted in planning, and degree of formalisation in planning process, as shown in Table
The above classification is not mutually exclusive but iterative. For example, strategic and tactical planning may be undertaken on the basis of proactive or reactive approach, or formal or informal basis. However, in each set of classification, the type of emphasis put in planning process differs.
Fundamental of Planning
CORPORATE PLANNING AND FUNCTIONAL PLANNING
We have seen earlier that planning activity is pervasive and can be undertaken at various levels of an organisation. It may be for the organisation as a whole or for its different functions. Thus, based on the coverage of activities, there may be planning for the organisation as a whole, known as corporate planning or for its different functions, known as functional planning.
Fundamental of Planning
Corporate Planning
The term ‘corporate planning’ denotes planning activities at the top level, also known as corporate level, which cover the entire organisational activities. The basic focus of corporate planning is to determine the long-term objectives of the organisation as a whole, and then to generate plans to achieve these objectives bearing in mind the probable changes in environment. Because of long-term orientation involved and strategic aspects covered in corporate planning, it is also used as synonymous to long-term planning or strategic planning. However, some distinction exists among these at least at the conceptual level. Similarly, some authors use corporate planning as the total process of management. For example, David Hussey has defined corporate planning as follows:
This definition of corporate planning is quite broad and may cover many management functions not necessarily related to planning aspect of management functions. For example, planning sets future course of action and its implementation is not strictly the planning function. Therefore, the concept of corporate planning should be taken as the total planning activities in the organisation and not the total management functions.
Similarly. corporate planning is used as long-range planning because long-range planning emphasises the future orientation of the process. However, there is growing opinion which disfavours the use of long-range planning as synonymous with corporate planning because it underemphasises the comprehensive nature of corporate planning. The process of corporate planning is concerned with all aspects and not only the long range. Although the future orientation is certainly the most important argument in favour of the process, long-range planning without the back-up of short-range planning will fail. Differences between corporate planning and long-range planning can be understood by classifying the more comprehensive corporate planning further into segments. Normally, corporate planning is divided into strategic planning or long-range planning and operational, tactical, or shortrange planning
Fundamental of Planning
Functional Planning
As against corporate planning which is integrative, functional planning is segmental, and it is undertaken for each major function of the organisation like production/operation, marketing, finance, human resource/personnel, etc. At the second level, functional planning is undertaken for sub-functions within each major function. For example, marketing planning is undertaken at the level of marketing department and to put marketing plan in action, planning at subfunctions of marketing like sales, sales promotion, marketing research, etc., is undertaken. A basic feature of functional planning is that it is derived out of corporate planning and, therefore, it should contribute to the latter. This contribution is achieved by integrating and coordinating functional planning with corporate planning.
Fundamental of Planning
STRATEGIC PLANNING AND OPERATIONAL PLANNING
Comprehensive corporate planning may be divided into strategic and operational depending on the direction of actions set in the organisation. One part of the planning sets future direction of the organisation and another part confines itself to devise actions to proceed in that direction. The former is known as strategic planning while latter is known as operational or tactical planning.
Fundamental of Planning
Strategic Planning
Strategic planning sets the long-term direction of the organisation in which it wants to proceed in future. Anthony has defined strategic planning as follows .
Examples of strategic planning in an organisation may be: planned growth rate in sales, diversification of business into new lines, type of products to be offered, and so on. This way, strategic planning encompasses all the functional areas of business and is affected within the existing and long-term framework of economic, political, technological, and social factors. Strategic planning also involves the analysis of various environmental factors particularly with respect to how organisation relates to its environment.
A basic problem in strategic planning is the period for which plan is to be formulated. Normally, more than one year period is considered to be a long one. Usually, for most of the organisations, it ranges between 3 to 5 years. However, there should be some logic in selecting the right time range for planning. In general, since planning and forecasting that underlies it are costly, and organisation should not plan for a longer period than is economically justifiable: yet it is risky to plan for a shorter period. The choice of period lies in the *commitment principle’ which suggests that logical planning encompasses a period of time in the future necessary to foresee, as well as possible, the fulfilment of commitments involved in decisions made today. What the commitment principle implies is that long-range planning is not really planning for future decisions but rather planning for the future impact of today’s decisions. In other words, a decision is commitment, normally of funds, direction of action, or other similar things. Therefore, the most striking application of planning period would be the setting up of time period long enough to anticipate the recovery of costs sunk in a course of action.
Fundamental of Planning
Operational Planning
Operational planning, also known as tactical or short-term planning, usually covers one year or so. It is aimed at sustaining the organisation in its production and distribution of current products or services to the existing markets. Operational planning can be defined as follows:
Operational planning taken in this way answers the questions about a particular function as follows:
1 Why is the action required?
2. What action is to be taken?
3. What will the action accomplish?
4. What are the results of the action required?
5. What objectives and conditions must be met?
Operational planning is undertaken out of the strategic planning. The various examples of operational planning may be adjustment of production within given capacity, increasing the efficiency of operating activities through analysing past performance, budgeting future costs, programming the comprehensive and specific details of future short-term operations, and so on.
Fundamental of Planning
Difference between Strategic Planning and Operational Planning
Apart from the period of time involved in strategic planning and operational planning. there are certain differences between the two. The major differences between the two can be identified as follows:
1 Range of Choice. Strategic planning guides the choice among the broad directions in which the organisation seeks to move and concerns the general planned allocation of its managerial, financial, and physical resources over future specified period of time. Operational planning, on the other hand, focuses on the ways and means in which each of the individual functions may be programmed so that progress may be made towards the attainment of organisational objectives. Usually, operational planning aims at contributing to strategic planning as the former tries to achieve results and actions suggested by the latter,
2. Type of Environment. The type of environment for two types of planning is different. Strategic planning takes into account the external environment and tries to relate the organisation with it. It usually encompasses all the functional areas of the organisation and is affected within the existing and long-term future characteristics of various environmental factors. The nature of external environment, thus, is of prime concern of strategic planners. Operational planning mostly focuses on internal organisational environment so as to make the effective use of given resources.
3. Primacy. Strategic planning precedes operational planning since the latter is primarily concerned with the implementation of the former. Strategic planning sets trends and direction for managerial actions; its time horizon is usually quite long. Operational planning is heavily concerned with short-term programmes implementing step by step progress towards basic organisational goals. In the short term, managers have to work within the framework of given resources as the functional capabilities of the organisation are generally restricted because in the short term, there cannot be fundamental change in these. Therefore, strategic planning must recognise the limits of what operational planning can realistically be undertaken in given time periods.
4. Level of Formulation. Strategic planning is formulated usually by top-level management and other specified planning staff in the organisation. At this level, managers can take overall view of the organisation and have necessary capability to relate the organisation with the external environment. Operational planning is usually spread over a wide range within the organisation and is generally performed by operating managers with the help of the subordinate staff. Since two planning groups are widely separated in the organisation, some incompatibility may exist between two types of planning. Therefore, there is a need for integrating these two in order to have better planning effects. If planning is taken as an integrated system, most of the problems of conflict between strategic and operational planning may be overcome.
Fundamental of Planning
LONG-TERM PLANNING AND SHORT-TERM PLANNING
Planning is concened with problems of future. Thus, a planning system must involve different degrees of futurity. Some parts of the organisation have requirements that entail planning for many years into the future, while others require planning over only a short horizon. Capital expenditure, for example, is more subject to long-range planning than any other area. Such plans frequently form the basis of other planning. The planning period is divided generally into (1) long term and (ii) short term. However, the time dimension of planning is not so obvious as it might appear. Many complex factors interact to determine planning! period—the industry peculiarities, the market demand, the availability of resources, the lead time involved in the product life cycle, etc. Thus, what might be a long period of planning for one organisation, might be a short period for others.
What should be an ideal planning period depends upon commitment principle Commitment principle implies that long-range planning is not really planning for future decisions, but rather planning the future impact of today’s decisions. In other words, a decision is a commitment, normally of funds, direction of action, or reputation. Thus, the commitment for different parts of organisation differs. Costs incurred on purchasing a machine may be recouped in ten years and management must foresee the situation for the coming ten years. Similarly, a small manufacturer of spare parts who completes his production cycle consisting of raw material acquisition, production, inventory, sales, and collection of money in six months or so requires a commitment period of six months only and the planning period covers only this period.
Fundamental of Planning
Long-term Planning
Long-term planning is of strategic nature and involves more than one-year period extending to twenty years or so. However, the more common long-term period is 3 to 5 years. The longterm plans usually encompass all the functional areas of the business and are affected within the existing and long-term framework of economic, social, and technological factors. Long-term plans also involve the analysis of environmental factors, particularly with respect to how the organisation relates to its competition and environment. Sometimes, basic changes in organisation structure and activities become the real output of such plans. Examples of such changes may be new product, product diversification, individuals in the organisation, development of new markets, etc.
A distinction between short-range and long-range planning is often made on the basis of the period of time involved. Though there is a clear correlation between these kinds of planning and the length of time horizons, the more important distinction is on the basis of the nature of planning.
Fundamental of Planning
Short-term Planning
Short-term planning, also known as operational or tactical planning, usually covers one year. These are aimed at sustaining organisation in its production and distribution of current products or services to the existing markets. These plans directly affect functional groupsproduction, marketing, finance, etc. Within its time dimension, they answer pertinent questions about a particular function as follows:
1 Why is the action required?
2. What action is to be taken?
3. What will the action accomplish?
4. What are the results of the action required?
5. What objectives and conditions must be met?
Coordination of Short-term Planning and Long-term Planning. In fact, in a successful planning process, short-term plans are made with reference to long-term plans because short-term plans contribute to long-term plans. As such, there is a need for coordination between these two plans. The managers should consider, while preparing the short-term plans, that they are contributing to the long-term plans. For this purpose, they should scrutinise the former in the light of the latter and subordinates should also be made aware of this fact. Sometimes, the short-term plans do not contribute to long-term plans, but contribute to the organisational objectives. In such a case, the long-term plans need to be modified. This can be done when there is flexibility in planning.
PROACTIVE PLANNING AND REACTIVE PLANNING
Classification of planning into proactive and reactive is based on the organisation’s response to environmental dynamics. We have seen earlier that planning is an open system approach and is affected by environmental factors which keep on changing continuously. However, organisations’ responses to these changes differ. Based on these responses, planning may be either proactive or reactive,
Fundamental of Planning
Proactive Planning
Proactive planning involves designing suitable courses of action in anticipation of likely changes in the relevant environment. Organisations that use proactive planning use broad planning approaches, broad environmental scanning, decentralised control, and reserve some resources to be utilised for their future use. These organisations do not wait for environment to change but take actions in advance of environmental change. Most of the successful organisations, generally, adopt proactive approach in planning. In India, companies like Reliance Industries, Hindustan Lever, etc. have adopted this approach and their growth rate has been much faster than others.
Fundamental of Planning
Reactive Planning
In reactive planning, organisations’ responses come after the environmental changes have taken place. After the changes take place, these organisations start planning. In such a situation, the organisations lose opportunities to those organisations which adopt proactive approach because, by the time, reactors are ready with their plans, the contextual variables of planning show farther changes. Therefore, their plans do not remain valid in the changed situations. This approach of planning is useful in an environment which is fairly stable over a long period of time.
