Everything you need to know about the importance of planning. Planning is an important and basic function of management.
Orderly procedure is possible through planning. Planning states the way through which the objectives are achieved and anticipates the activities well in advance i.e., planning should take place before doing.
According to George R. Terry, “Planning is basic to the other fundamental management functions that is organizing, actuating and controlling. Without the activities determined by planning, there would be nothing to organize, no one to actuate, and no need to control. This viewpoint stresses the importance of planning in the management process.”
Learn about the importance of planning in the sphere of business enterprise, organisation and management.
Importance and Significance of Planning in Business, Organisation and Management
Importance of Planning – In the Sphere of Management
The importance of planning can be highlighted by discussing about the benefits it brings about and the kind of problems which may erupt in its absence. Planning has numerous reasons which support its utility and importance in the sphere of management.
Importance # 1. Setting Objectives End Priorities:
Planning aids in setting objectives and priorities for the managers. Drucker (1954) in his theory on MBO recommends that every manager should be given clear objectives to be achieved. Strategic planning results in setting strategic objectives, which boil down to tactical goals and further seep down to aid in operational planning. Thus, planning aids in setting these objectives for all managers in the organization and hence, guides the managers to be focused upon the objectives to be achieved.
In a practical scenario, managers are swamped with various activities every day. It may not be feasible for them to devote equal attention to all these activities forced upon them. This leads them to think rationally and set priorities to these activities in the order of importance or “value-add” associated with them in the achievement of objectives set-out for them. Some activities may get pushed to future time frames or may be delegated to subordinates if deemed of less value- addition to the concerned manager (and her objectives).
Importance # 2. Credibility End Trust of Stakeholders:
Planning indeed increases credibility and trust with the stakeholders of an organization. Stakeholders are people impacted directly by an organization’s activities including the shareholders, employees, vendors, customers/clients, etc. They need to be often convinced by the managers about the merits of important actions taken by them which may directly impact the stakeholders.
It is always easier for the managers to take the stakeholders into confidence by sharing, the elaborate and formal plans made by them in relation to such future important actions. For example, it is argued that the Tata’s failed to communicate the societal and rehabilitation plans made by them for the farmers displaced at Singur (West Bengal) for the Nano car facility earlier planned there (before relocation of the same was forced to Sanand in Gujarat by the agitating farmers in Singur).
Importance # 3. Building Consensus:
Planning helps in building a consensus within the organization by providing a common platform for setting objectives for all managers. Higher level objectives as ends are directly tied to the lower-level objectives as the means for their accomplishment, thus creating a means-end chain or hierarchy of objectives. Thus, everybody directly or indirectly strives for achieving the organizational objectives. Planning (and the objectives thereof) thus serve as a single thread (of purpose) binding the whole organization.
Importance # 4. Setting and Managing Expectations:
Planning is also useful in setting and managing expectations in a realistic way. The objectives assigned to every manager inform her about the expectations of the organization from her. While setting the objectives, the manager’s expectations should also be taken into account so as to create a synergy between organizational (strategic or tactical) objectives/goals and the individual’s objectives.
Importance # 5. Allocation of Resources:
Planning results in optimal allocation of resources. Planning helps allocate limited resources like staff, materials, and time in an orderly and systematic manner into various types of activities. In the absence of planning, there is increased likelihood of many resources becoming over-allocated while other resources remaining idle, thus resulting in wastage of organizational resources.
Importance # 6. Framework for Decision-Making:
Planning provides a framework for decision-making. In the performance of various activities, managers have to often take decisions. Such decisions are much easier to take and are less prone to errors if backed by good planning done earlier.
Thus, a well-developed plan created in the past guides a manager in taking suitable decisions in case of unforeseen problems encountered during the implementation of some actions. Planning helps decision makers by providing guidelines and goals for future decisions. Planning can help ensure that a coherent set of actions are implemented which are consistent with the values and priorities of the decision maker.
Importance # 7. Current Challenges and Future Problems:
Planning requires a manager to think critically about the activities being planned so as to resolve current challenges while avoiding future problems. This proactive approach helps in overcoming not only the present challenges but also prompts the managers to figure out possible hurdles in future and ways of avoiding the same.
Importance # 8. Coordination:
Planning improves coordination in a big way. According to Drucker (1954), the objectives set out for every manager should specify what performance outputs are expected to be generated by the manager’s own managerial unit, how his unit may help other managerial units in achieving their objectives, and last but not the least, what help the manager can expect from other units in achieving his own objectives.
In nutshell, the emphasis from the beginning should be on teamwork and team results. Thus, the planning process which starts from setting the objectives improves camaraderie and a sense of teamwork.
Importance # 9. Time Management:
Planning aids in managing time effectively on part of managers. Time is perhaps the most important resource for the managers, which gets consumed at a constant rate. Proper utilization of time by managers into value-adding activities would of course be most desired. This is possible only when managers plan-the activities of their day by sequencing tasks with higher priorities while pushing down the low priority tasks to subordinates or future periods of time.
Importance # 10. Control Mechanisms:
Last but not the least, planning facilitates control mechanisms. Planning helps a manager exercise more control in a situation, establish goals proactively and consider contingencies. Planning can help quantify goals and establish a means of measuring success.
A feedback loop (a form of control mechanism) acts as a means of evaluating actual performance against planned performance of a product or service produced by the organization. Planning and control are rightly said to be the Siamese twins of management.
Importance of Planning – In Business Enterprise
1. Taking Care of Future Activity:
Planning is based on forecast about the future. Besides assessing the future, it makes provision for contingencies. Thus forecasting reduces uncertainty and the consequent risk in business. Even if uncertainties happen, the business is well-poised to meet the eventualities successfully. In other words, a forewarned business enterprise is forearmed.
2. Direction to Employees:
The objectives set in planning process help employees to know what they are supposed to achieve; by what time; at what cost and by what process. Thus clarity in objectives on the part of employees inspires them to contribute productively towards goal attainment. In the absence of clear-cut planning, employees would be wasting their time and energy on unproductive pursuits in the organization.
3. Facilitating Control:
The control function presupposes the existence of planning function. It cannot be performed without planning. The objectives set in the planning process represent standards of performance which is core to control function. Thus performance appraisal done through the control function operates on the fulcrum of objectives set under planning function. Thus planning function is seed for control function.
4. Facilitating Co-Ordination:
The objectives, policies and programmes of various departments/divisions/segments are laid down in the planning process. Each segment in turn sets down the objectives to be achieved by each individual working thereat. When all the departments endeavour to attain the respective objectives within the stipulated time, the overall goal of the enterprise is attained. Thus plan serves as the basis for orderly integration of contribution of various segments. Otherwise coordination function cannot be performed.
5. Effective Utilization of Resources:
Each individual and department is made known through objective setting in planning process what it is supposed to achieve in a given timeline using the resources at its command. Hence there is no scope for wastage of resources in the organization proceeding on a clearly planned track.
Besides there is optimum utilization of resources thereat. The various forms of plan like policies, procedures, programme, strategies budgets and so on minimize wastage of resources to a negligible extent. Thus without planning process, effective utilization of resources is out of question.
6. Nurturing Creativity:
Planning is an intellectual exercise. It involves anticipating the future, determining the objectives, selecting best course of action to accomplish a desired result, etc. It provides abundant opportunities for planners to think out of box and rethink the existing action. Thus each activity in the planning process challenges the planners.
As a result, new product or process improved versions of existing product or new opportunities are identified. Strategies are framed to meet contingencies likely to emerge from the plans made. All these provide fodder to the creative urge of planners.
7. Response to Ever Changing Environment:
Management of change is based on planning. Planning enables the management to keep itself abreast of the latest developments which are likely to influence the future and take appropriate and timely measures to deal with them. No organization can address the consequences emanating from uncertain future without proper contingency plans. Thus planning strengthens the capabilities of an organization, to deal with a rapidly changing environment.
8. Enhancing Overall Efficiency:
Proper utilisation of resources, joint and directed efforts of human assets, higher capacity to deal with changes emerging from dynamic environment, cooperation of employees, selection of best alternative and so on which are the beneficial outcomes of planning empowers the organization to be efficient in all its functional aspects.
9. Winner Employee Co-Operation:
Each and every employee in a planned work environment knows the jobs to be performed, and the time line within which the work is to be carried out. Besides, planning facilitates effective delegation of authority to act, remove communication gaps and secures willing cooperation of employers. It instills in employees a sense of involvement, commitment and team spirit.
10. Enabling to Meet Competition:
Planning empowers an enterprise to shield itself from fierce competition. Intelligent forecasting of market trend, strategic pricing, distribution and promotion, effective product planning and so on help the enterprise to meet and beat the competitors.
Importance of Planning
1. Clear, Specific and Achievable Objectives:
Planning ensures effective implementation of plans and direction of efforts. Very often the goals and objectives are not specific. As a result, the actual activities undertaken deviate from the desired path leading to wastage of effort and inefficiency. Before plans are drawn, it is essential that objectives or goals to be achieved must be clearly defined. The planning exercise makes the goals clear and specific because it begins with the determination of objectives and thus, it helps in achievement of the organisational objectives.
2. Meaningful Activities:
In the process of planning, actions become meaningful in the sense that employees and managers know how their activities relate to organisational goals. The main concerns of their own activities are in relation to other activities. Everyone is conscious of his own assistance towards the achievement of organisational goals. This acts as a motivating force, encouraging the employees to work harder.
3. Reduced Risks of Uncertainty:
With proper planning, managers make provisions for such uncertainties that help to reduce the risk of uncertainties. This includes peeping into the future to predict uncertainties.
4. Ensures Coordination and Cooperation:
Planning helps in coordination of the various activities, departments and groups. Plans are laid down in advance that what should be done, by whom and when. Planned programme of activity serve as the basis of harmonizing the efforts of different divisions, departments and people.
Planning helps the management to motivate the individual to achieve common objectives or goals. Planning provides well-defined objectives, unity of direction, well-published policies, procedures and programs. All these help to get full cooperation and coordination, which consequently avoids duplication of work and interdepartmental conflicts.
5. Facilitates Decision-Making:
Planning essentially involves identifying the various alternative courses of action, evaluating them and selecting the best alternative. Planning facilitates this process. Without planning, decisions may lead to undesirable results and will direct activities towards uncertain goals.
6. Promotes Creativity:
A creative thinking and innovation of new methods of operation, besides developing new ideas leading to growth and prosperity of the business. In the process of planning, managers have the opportunities of suggesting ways and means of improving their performance and achieving higher targets. There is a challenge before management not only to solve future problems but also to take maximum advantage of favorable conditions.
7. Basis of Control:
In absence of planning there can be no control because evaluation of performance against predetermined goals is the basis of control. Planning provides the standards against which actual achievement is compared. Deviations of actual results from the standards indicate the nature of corrective action needed. Therefore, planning may be said to provide the basis of control with the standard performance.
8. Planning Leads to Economy and Efficiency:
Plans and programmes show precisely how various tasks are to be utilized for the purpose. Availability of advance information on such matters, leads to economy.
9. Ensures Better Utilization of Resources:
Planning decides what to produce and how to produce. Because of which there is the possibility of utilizing the resources effectively.
10. Motivates Employees:
A good plan encourages the employees of an organisation and gives them a sense of effective participation. Planning make clear the employee as to what the organisation wants to achieve and motivates the employees to help the organisation in achieving it.
11. Develops Rationality among Management Executives:
Management executives put their thoughts in blue print form. Disciplined thinking of management executives is geared up through formal planning. In this way, planning brings rational thinking and approach among management executives.
12. Prevents Hasty Judgment:
We can analyze a problem through a plan and consider the alternatives, before taking a sound decision. It is possible to plan in advance so as to what will be done and how it will be done. This process avoids hasty judgment.
13. Promote Growth and Improvement:
Planning sets a standard to control purpose. So, useless and aimless activities are avoided. Planning helps in the growth and improvement of an individual and the organisation.
14. Enhances Competitive Strength:
Competitive strength is enhanced with a new line of products, changes in quality and size of the product, expansion of plant capacity and changes in methods of work. This is because planning helps employees to avoid needless efforts and reduce wastage. What is to be done, how and when are specified in the plans. Hence, there is no scope for using trial and error methods. This also leads to efficiency of operations. Eventually, the improved competitive strength is obtained through planning and purposeful motives.
Importance of Planning – With Reasons
Planning is an important and basic function of management. Orderly procedure is possible through planning. Planning states the way through which the objectives are achieved and anticipates the activities well in advance i.e., planning should take place before doing.
According to George R. Terry, “Planning is basic to the other fundamental management functions that is organizing, actuating and controlling. Without the activities determined by planning, there would be nothing to organize, no one to actuate, and no need to control. This viewpoint stresses the importance of planning in the management process.”
Defective planning and inadequate planning leads to failure of the organisation. Everybody knows that no activity could be performed in an organisation without planning. Proper planning coordinates the activities of different sections of people working in an organisation. According to Earnest C. Miller, “Managerial planning attempts to achieve a consistent, co-ordinated structure of operation focused on desired ends. Without plans, action must become merely random activity, producing nothing but chaos.”
The business unit has to work in uncertain and ever changing conditions. It is very difficult to continue the business under such situations. Effective planning can anticipate the uncertain events and help prepare the workforce to meet the situation to survive. George R. Terry has rightly said that, “Planning is the foundation of most successful actions of any enterprise.”
Planning helps the businessman get early success. Success without planning is almost impossible in business.
So, the planning function is very important due to the following reasons:
1. To Manage by Objectives:
All the activities of an organisation are designed to achieve the framed objectives. However, planning makes the organisation focus on the objectives for early achievement.
2. Convert Uncertainty into Certainty:
Future is full of uncertainties. These uncertainties may be predicted through forecasting. Then, the planning provides necessary provision to face the uncertainties. Besides, planning evaluates the alternative course of action for the continuous growth and prosperity of the organisation.
3. Economy in Operation:
Planning selects any one of the available alternatives which will help produce the best results at minimum costs.
4. Help in Co-Ordination:
The co-ordination is obtained by the management through planning, well-published policies, programmes and procedures. So, planning also helps the management get co-ordination. According to Koontz and O’Donnell, “Plans are selected courses along which the management desires to co-ordinate group action.”
5. Tackling Increasing Complexities of Business:
At present, there is need for many people with different qualifications to run a business. This makes it necessary for the management to plan the business activities clearly as to who is to do, what is to be done, where is to be done, when it is to be and how it is to be done.
6. Effective Control:
Control is necessary only when there is a deviation in the actual performance from the planned performance. In the absence of a plan, there are no standards to compare. In simple words, planning without control are useless and control without planning is impossible. H.G. Hicks has said that, “Planning is clearly a prerequisite for effective controlling. It is utterly foolish to think that controlling could be accomplished without planning; without planning there is no predetermined understanding of the desired performance.”
7. Effective Utilisation of Resources:
Planning involves deciding in advance of the business activities. Then, the business activities are completed without any delay. It leads to effective utilisation of resources at the cheapest and in the best manner.
8. Avoiding Business Failures:
Planning includes the selection of best objectivities, conversion of uncertainty into certainty, economy in operation, co-ordination, facing the complexities, effective control and effective utilisation of resources and avoiding business failures.
Importance of Planning – In the Words of Drucker, Koontz and O’Donnell
Planning is one of the most important project management and time management techniques. Planning is preparing a sequence of action steps to achieve some specific goal. If you do it effectively, you can reduce much the necessary time and effort of achieving the goal.
In the words of Koontz and O’Donnell, “without planning, business becomes random in nature and decisions become meaningless ad-hoc choices”.
Drucker points out that a ‘manager who works without planning should try to live without profits’.
1. To Focus Attention on Objectives:
Good and effective management is management by objectives. An enterprise without any objective is like a journey without a destination. No organisation can succeed without being clear about the objectives. Selection of path as well as the assessment of achievements will depend upon the objectives as outlined for a business. Planning compels the managers to prepare a ‘blueprint’ of the course of action to be pursued for the accomplishment of the objectives of the organisation.
Planning helps in avoiding internal conflicts between the different courses of action. It brings about a higher degree of order and rationality into the organisation. It reduces aimless activity and makes action purposeful. “If you don’t know where you are going, no road will get you there”.
2. To Take Care of Future Uncertainty and Change:
Planning calls for foresight on the part of business manager. A good plan provides for and takes care of all future uncertainties, and thus, minimizes business risk. Planning anticipates future events and sets the course of action to control those events to one’s advantage.
Forecasting is an important element of the process of planning. It encourages manager to act with initiative and create situations favourable to the organisation. Planning enables management to make constructive use of new opportunities.
3. To Secure Coherent and Consistent Decisions:
Planning is a bulwark against making impulsive snap decisions by managers on major issues of interest to the organisation. It provides the required guidelines for the decision making and action initiative on a coherent and consistent basis at the lower management level.
4. To Secure Economy in Operation:
Planning focuses on efficiency and economy in operation. Planning aims at eliminating all wastes from the manufacturing process. It replaces chaos, confusion and disorder by cooperation and coordination. It eliminates duplication and overlapping of efforts. It ensures optimum utilization of scarce resources. Plans serve as reliable rallying points for the organisational participants to channelize their energies towards meaningful ends.
5. To Make Control Effective:
Planning and control are inseparable. Control is impossible without planning, just as planning is meaningless without control. Planning enables the manager to compare the actual performance with the desired performance: Plans serve as standards for evaluation. A planning provides bench marks and standards to monitor, measure, evaluate and control the performance of organisational participants and the various productive systems within the origination. Planning gives direction to haphazard movement.
6. To Improve Motivation and Morale:
Planning motivates the workers and improve their morale. It defines the objectives of the business and provides suitable means of communication throughout the organisation. It facilitates delegation of authority and assists managers in providing consistent, aggressive and confident leadership.
A plan is like a map. When following a plan, you can always see how much you have progressed towards your project goal and how far you are from your destination. Knowing where you are is essential for making good decisions on where to go or what to do next.
One more reason why you need planning is again the 80/20 Rule. It is well established that for unstructured activities 80 per cent of the effort give less than 20 per cent of the valuable outcome. You either spend much time on deciding what to do next, or you are taking many unnecessary, unfocused, and inefficient steps.
Planning is also crucial for meeting your needs during each action step with your time, money, or other resources. With careful planning you often can see if at some point you are likely to face a problem. It is much easier to adjust your plan to avoid or smoothen a coming crisis, rather than to deal with the crisis when it comes unexpected.
Importance of Planning – In an Organisation
In the dynamic and changing environment planning ensures the growth and survival of the organisation.
The importance of sound planning is as under:
1. Attainment of Organizational Objectives:
Planning helps the organisation to attain its objectives. It provides the path for achievement of organisational goals with minimum waste of money energy and time. It bridges the gap between desired and actual position.
2. Reduction of Uncertainty and Risk:
Planning cannot eliminate uncertainty and change, because they are inevitable. But planning enables any organization to cope with uncertainty and prepare to face the unexpected events. Thus, planning is helpful in reduction of uncertainty and risk.
3. Facilitates Decision-Making:
Decision-making is the process of choosing a course of action from two or more alternatives. Planned targets facilitate the criteria for the evaluation of different course of action and select the best alternative. Planning involves forecasting of future conditions, which is helpful in sound planning. Such planning can prevent hasty decisions and haphazard action.
4. Provides the Basis for Control:
Planning frames standards of performance against which the actual performance can be measured. A comparison of performance with the desired result helps to identify the deviations and to remove those deviations to make better plans for future. Therefore, planning is the basis for control.
5. Improves Efficiency of Operations:
Planning involves selection of best course of action. It helps to achieve optimum utilisation of available resources and to eliminate all types of waste. Planning is the foundation of the most successful operations of any organisation. It makes the total task of managing more efficient and effective. It improves the competitive strength of an organisation by reducing the cost of operations.
6. Helps in Coordination:
The diverse forces at work are integrated by planning. All the activities and resources of the organisation or interrelated by sound planning. It is also helpful in relating internal conditions and processes to external events and forces. It harmonizes the activities and efforts of various departments and divisions of the organisation.
7. Promotes Innovation and Creativity:
Innovation and creativity are very crucial for continuous growth and steady prosperity of Business. A continuous monitoring of environment for new ideas and development is required in planning. Planning promotes new ideas, new products, and new relationships and thus, promotes innovation and creativity.
8. Guides about Sense of Direction:
Human efforts are directed into endeavours by planning that contribute to the accomplishment of goals more meaning full work and more orderly activities are due to planning. It bridges the gap between our present and desired position.
Importance of Planning – With Benefits
Planning is an essence of doing an activity. Formulation of plans is an extensive exercise. Planning provides direction and reduces the risk of uncertainty by forecasting the activities to be done in future.
Let us discuss the importance or benefits of planning:
1. Planning Provides Directions:
Planning provides directions for actions to the entire organisation by –
i. Defining clearly the organisational goals and objectives.
ii. Stating in advance how work is to be done.
iii. Making employees aware of what they must do to achieve organisational goals.
iv. Facilitating coordination among individuals and departments in the organisation.
Thus planning ensures that all employees work in the desired direction and achieve the desired goals for the organisation.
2. Planning Reduces the Risk of Uncertainty:
Planning reduces the risk of uncertainty by –
i. Enabling managers to look ahead and anticipate changes
ii. Stating in advance how work is to be done and helping managers to prepare themselves to deal with changes and uncertain events.
iii. Developing managerial responses to the anticipated changes.
3. Planning Reduces Overlapping and Wasteful Activities:
The overlapping and Wasteful activities are reduced because planning –
i. Coordinates the activities and efforts of different departments, divisions and individuals.
ii. Reduces confusions and misunderstandings by stating in advance how to work.
iii. Ensures that there is clarity in thoughts and actions for smooth function of business activities.
iv. Eliminates redundant activities, detects, inefficiencies or take measures to correct them.
4. Planning Promotes Innovative Ideas:
Planning being the primary function ensures that –
i. New ideas are developed while preparing concrete plans
ii. Future course of action is well thought with better ideas and better methods and procedures to achieve organisational goals.
5. Planning Facilitates Decision Making:
Planning helps managers to –
i. Set targets and predict future conditions.
ii. Evaluate various alternative courses of action and select the best possible course of action.
iii. Take rational and feasible decisions after comparing and evaluating various options.
6. Planning Establishes Standards for Controlling:
Planning facilitates measuring of employees’ actual performance by –
i. Setting goals and deciding how the work is to be done.
ii. Predetermining goals or targets, which may be considered as standards to compare employees’ actual performance.
iii. Facilitating comparison of standard performance with actual performance to check efficiency of each department, division and individual.
iv. Helping managers to take corrective actions in case of any deviations from set plans.
From the above discussions, we can conclude that planning being the primary function of management provides guidelines or directions for achieving organisational goals, prepares managers to look ahead and anticipate changes, plan appropriate steps to deal with uncertainties and rational decision-making after evaluating several alternative courses of action. Thinking in advance increases scope of newer ideas, elimination of overlapping and detection of useless activities.
Importance of Planning – Views of Henry Fayol
Planning is an indispensable activity in globalised modern organisations. Without sound and proper planning, the affairs of any enterprise are most likely to be haphazard. There may be repetition of certain activities, wastage of money, time, efforts and resources. Objectives and goals would not be achieved in time. In short, without plans, action becomes merely random activity, producing nothing but chaos. Therefore, planning is a must to achieve consistent and co-ordinated structure of operations focused on desired objectives.
Henry Fayol has explained the significance of planning as a function of management in the following words – “The maxim of Managing means looking ahead. It gives some idea of the importance attached to planning in the business world and it is true that its foresight is not the whole of management. It is an essential part of it. The plan of action, at one and the same time, is the result envisaged, the line of action to be followed, the stages to go through and the methods to use.”
An efficient system and planning enable a business enterprise to achieve the following advantages or benefits:
Importance # 1. Concentrates on Objectives:
Basic feature of planning is its relation with organisational structure. All the operations are planned to achieve the organisational objectives. Planning facilitates the achievement of objectives by focusing attention on them. It provides clear definition of objectives so that the most appropriate alternative course of action is chosen.
In absence of planning, there is a danger that Manager and other members of the organisation may get lost in the maze of routine activities and lose sight of the broad objectives, for the achievement of which, the organisation is established. Thus it protects the management from being the victim of means-becoming ends in themselves.
Importance # 2. Reduction of Uncertainty:
Future is always unpredictable and always full of uncertainties. A business concern has to function in these uncertainties. It can operate smoothly and successfully, if it is able to predict the uncertainties. Some of the uncertainties can be predicted by undertaking, systematic forecasting.
Thus, planning helps in foreseeing uncertainties which may be caused by changes in technology, fashion and taste of people, government policies, rules and regulations, market conditions etc. Collecting such information provides a better understanding of what is likely to happen in the future and how an organisation should react, if different conditions crop up.
Importance # 3. Co-Ordination:
It is one of the basic features of planning that it is related to the organisational objectives. All the operations are planned to achieve the organisational objectives. Planning facilitates their achievement by focusing attention on them. Good plans unify the inter-developmental activities and clearly lay down the area of freedom in the development of various sub-plans.
Various activities are performed by different departments. Various department work in accordance with the overall plans of the organisation. Thus there is harmony in organisation and duplication of efforts and conflict of jurisdictions are avoided.
Importance # 4. Economy in Operations:
Planning ensures economical operations because of emphasis on efficiency. Since planning involves the selection of the best possible courses of action, it is implied that best results would be achieved at the least possible cost.
Importance # 5. Planning Facilitates Control:
Planning and control are inseparable in the sense that unplanned action cannot be controlled because control involves keeping activities on the predetermined course and by rectifying deviations, if any, from plans. Planning helps control by furnishing standards of performance.
Importance # 6. Encouragement to Innovations:
Planning helps innovative and creative thinking among the managers because many new ideas come to the mind of a manager during planning. It creates a forward looking attitude among the managers.
Importance # 7. Increase in Competitive Strength:
Effective planning gives a competitive edge to the enterprises over other enterprises that do not have planning or have ineffective planning. Thus, planning may involves expansion of capacity, changes in work methods, changes in quality, anticipation of tastes and fashion of people and technology changes etc.
Importance # 8. Planning Focuses on the Future Directions, Values and Sense of Purpose:
Continuous planning by management shows precisely what the enterprise wants to achieve in a given period as well as how it intends to accomplish the predetermined objectives. The organisation knows its present position and also where it wants to go. Basic objectives indicate the direction of growth.
Importance # 9. Planning Provides a Unifying Decision Making Frame-Work:
Every company has a number of functional departments, such as production, finance, marketing, personnel etc. Departmental managers must develop their own functional strategy or departmental direction. Without an overall corporate plan, there will be confusion and chaos.
With a clear, effective master plan, each department knows what it must do to contribute to the achievement of company goals. And thus all the departments would work in unity to achieve common corporate goals. Eventually planning improves the decision making process in the organisation.
Importance # 10. Planning Helps to Identify Potential Opportunities and Threats:
Peter Drucker has pointed out that planning cannot completely eliminate the risk and uncertainties of the decisions in long term planning. But, it can certainly help to identify the potential opportunities and threats and at least minimise the risk or uncertainties.
A plan is based on concrete and reliable information both about internal and external environments and our sole aim is to secure a balance between our resources and our customer needs in order to offer maximum customer satisfaction. Objectives are set on the basis of inside and outside environmental forces revealing opportunities and threats.
Importance # 11. Keeps the Business Organisation Dynamic:
Need for planning is arisen from constant changes, in economic, social, political, technological and cultural fields. Therefore, these changes must be noted and their influence must be given consideration in the plans and policies from time to time. A business enterprise and its surrounding environments are mutually interdependent and interacting with each other, continuously.
A business enterprise lives in the world of resources, opportunities and limits. It can survive and grow only when it continuously adapts and responds in time to environmental changes. Change is the essence of life. If, there is anything constant, it is the change.
We are living in a dynamic world. Change also implies progress. Management through comprehensive business planning can anticipate, meet and adopt creativity to ever changing environmental conditions and demands. Planning aids the manager to assure the survival of the organisation under keen competition and changing environments.
Importance # 12. Planning Provides Performance Standards:
Ideal plan clearly specifies the targets to be reached. For example – If a standards production of one lac units of certain article during a specific period is prescribed, it, therefore, becomes imperative to achieve this target. Secondly if rate of return on shareholders’ investment is determined to be doubled within five years, the organisation has to work in that direction. The performance of a company is measured and controlled on the basis of such a specific performance standard.
Importance of Planning – Various Reasons to Suggest Why Planning is so Important to an Organisation
At this juncture, when the nature of planning and the steps involved in the planning process, to ask oneself the importance of planning may appear to be an academic question. However, it would be a gross simplification to suggest that most managers know the importance of rational and scientific planning.
How many believe and realise the importance of planning is evident from the fact that even today, when we have a plethora of management literature on planning, control, etc., we have countless instances of enterprises buckling down under sudden and unforeseen pressures and going out of business.
This is not always because of faulty planning but due to lack of proper planning. Such enterprises fail to cope with the pressures because of the manager’s belief in management by crisis. Instead of anticipating future problems and thinking in advance of the ways and means to tackle them, they believe in making decisions in a hand-to-mouth fashion in a frantic bid to tide over the crisis.
Besides the fact that planning helps bring orderliness and increases organisational efficiency, there are various reasons to suggest why planning is so important to an organisation.
Some of these reasons are given below:
(a) To Minimise Uncertainty:
The future is seldom certain. This makes planning imperative for all managers. With a business environment so dynamic and full of possible changes, no manager can afford to relax once the enterprise’s objectives are set. Obviously, he must constantly watch the developments and plan its activities well in advance.
Even when the future in certain and changes are discernible, the manager involves himself in some sort of planning by way of evaluating and selecting the most promising courses of action.
(b) Planning Brings Greater Economy in Operations:
By focusing on the objectives and selecting a course of action that would help attainment of objectives at the least cost, planning brings greater economy in operation. Be if the production department or the service department or for that matter, any department of the organisation, by ensuring correct action, planning helps the effective utilisation of capital, material and manpower resources.
(c) Planning makes Effective Control Possible:
Planning and control are like the Siamese twins. One cannot survive without the other. A manager cannot monitor and control what is not planned. Thus, planning helps the manager to evaluate performance of the subordinates by providing him the yardstick by which he can measure it and take timely and correct action.
(d) Planning Helps in Management by Objectives:
Way back in 1954, Peter F. Drucker said- “Today, one can hardly deny the benefits that organisation accrues by setting clear-cut objectives. And it is through the planning function that the manager focuses his attention on the formulation of objectives.”
Through planning, therefore, the manager evolves a clear-cut action pattern for the accomplishment of the plan objectives.