Planning precedes every other managerial function like organizing, staffing, directing and controlling. To accomplish the objectives, logically planning should be the first step.
By stating clear objectives in advance how work is to be done planning provides direction for action. Thus the objectives act as a guide for deciding what action should be taken and in which direction. All departments and individuals in the organization work in coordination.
In absence planning, departments and employees would be working in different directions then there are chances that the organization would not be able to achieve its desired goals.
Planning reduces the risks of uncertainty:
There is a continuous change in the environment and the organization has to work in synchronization with these changes.
There are two types of possible changes, tangible and intangible forms. Intangible changes are changes in attitude, values etc. while tangible changes can be seen in the form of technology.
Planning is an activity which enables a manager to look ahead and anticipate changes. By deciding in advance the tasks to be performed, planning lays the path to deal with changes and uncertain events. It should be noted that the changes or events cannot be eliminated but they can be anticipated in advance and correct managerial responses to them can be developed.
Planning reduces overlapping and wasteful activities thus improve coordination:
Sometimes coordination is called the essence of management and planning. In order to facilitate coordination, all managerial functions must be in mutual communication at all times.
Planning serves as the basis for coordinating the activities and efforts of different divisions, departments, and individuals. By planning, confusion and misunderstanding can be avoided.
Due to clarity in thought and action, work is carried on smoothly without interruptions. Useless, repetitive and redundant activities are identified and they minimized or eliminated.
Planning involves selecting the most profitable course of action that would lead to the minimization of the cost and better utilization of resources.
Thus planning increases the productivity of the organization.
Planning encourages innovations and creativity:
As planning is the first function of management, new ideas can take the shape of concrete plans.
It is the most challenging activity for the management because it leads to the growth and prosperity of the organization.
Planning facilitates decision making:
Planning is done keeping in mind the future. Hence the manager has to evaluate all available alternatives and studying all of them he has to choose the most feasible, economical and most viable alternative.
Planning involves setting targets and predicting future conditions thus helping in taking rational decisions.
Planning establishes standards for controlling:
Planning is done to achieve predetermined goals. Planning provides the goals or standards against which actual performance is measured.
By comparing actual performance with some standard, managers can verify the effectiveness of the process. If there is any deviation it can be corrected. Hence planning is a prerequisite for controlling.
The nature of corrective action required depends upon the extent of deviations from the standard.
Planning improves employee morale:
During planning both the goals and awards are decided. Hence the employees, tend to accomplish the goals in order to get the rewards within the stipulated period. They are inspired to work more and better to get the reward.
Planning provides a competitive edge:
Planning helps managers develop goals and objectives for every segment and individual in the company. It provides a benchmark for its overall development.
Limitations of Planning (Significance of Planning):
Planning leads to rigidity:
Planning is done for specific goals to be achieved within a specific time frame. These plans decide the future course of action and there is a possibility that managers may not be in a position to change it. Hence In many instances, advance planning may lead to the administration becoming inflexible. This kind of rigidity in plans may create difficulty.
In such cases, managers need to show some flexibility to be able to cope with the changed circumstances. If such flexibility is not shown then it may not turn out to be in the interest of the organization.
Planning reduces creativity:
Planning is an activity which is done by the top management. The members of lower management just implement these plans. Due to which middle management and other decision-makers are neither allowed to deviate from plans nor are they permitted to act on their own. Thus, the initiative or creativity inherent in them is lost or reduced.
Planning reduces creativity since people tend to think along the same lines as others.
Planning is expensive:
When plans are drawn up huge costs are involved in their formulation on account of time and money.
Detailed plans require scientific calculations to verify facts and figures. a huge cost is incurred in meetings, discussions and professional fees. At the same time, no returns or benefits can be guaranteed.
Planning is a time-consuming process:
Sometimes plans to be drawn up taking so much of time that there is not much time left for their implementation.
It is prudent not to make haste before putting something through the final stages of execution. In other words, planning is a time-consuming process.
Planning may lead to misdirection:
Planning rests on anticipating events. Success and failure are all dependent on forecasting correctly. If future events are misjudged or proper alternative is not chosen, it may lead to misdirection for the organization and may lead to huge losses.
Planning is a false sense of security:
Planning is essentially about anticipating the future, by definition then, its outcome is tentative. Every planning involves the planners’ ability to take well-calculated risks.
Planning may not work in a dynamic environment:
The business environment is continuously changing. It is dynamic. It consists of a number of dimensions, economic, political, physical, legal and social dimensions. The organization has to constantly adapt itself to changes.
In such a continuously changing environment, it becomes difficult to accurately assess future trends. Changed government policy, competition in the market can impact plan and the plan is to be modified according to changes. These depend on external factors.
Political climate: Taxation policy, regulation of business and finances through financial institutions, etc. regulate the planning process.
Trade unions: Strikes, lockouts, agitations restrict the freedom of planning. Trade unions can interfere in the management policies regarding work rules, wage fixation, and other benefits.
Technological changes: Due to technology changes, the management has to face problems such as high costs of production, competition in the market etc.
Delays during the emergency period: In the case of emergency situations, spontaneous decisions are to be taken simultaneously with pre-planned strategies.
Changes in demand and prices: Fluctuations in trends, tastes of the consumer, income level of the population, disposable income with population, demand, price etc. are important factors that affect planning.
Planning does not guarantee success:
The success of an organization is possible only when plans are properly drawn up and implemented. Managers have a tendency to rely on previously tried and tested successful plans. But in the new environment, it may not be practical to use the old plan. Such complacency and a false sense of security may actually lead to failure.