Planning Process
The
various steps involved in planning are given below
1 Perception of Opportunities
Although
preceding actual planning and therefore not strictly a part of the planning
process, awareness of an opportunity is the real starting point for planning.
It includes a preliminary look at possible future opportunities and the ability
to see them clearly and completely.
2 Establishing Objectives
The first
step in planning itself is to establish objectives for the entire enterprise
and then for each subordinate unit. Objectives specifying the results expected
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 network of strategies,
policies, procedures, rules, budgets and programs. Enterprise objectives should
give direction to the nature of all major plans which, by reflecting these
objectives, define the objectives of major departments. Major department
objectives, in turn, control the objectives of subordinate departments, and so
on down the line.
3 Considering the Planning Premises
Another logical
step in planning
is to establish,
obtain agreement to
utilize and disseminate critical
planning premises. These are forecast data of a factual nature, applicable
basic policies, and existing company plans. Premises, then, are planning
assumptions – in other words, the
expected environment of plans in operation. This step leads to one of the major
principles of planning. The more individuals charged with planning understand
and agree to utilize consistent planning premises, the more coordinated enterprise
planning will be. Planning premises include far more than the usual basic
forecasts of population, prices, costs, production, markets, and similar
matters. Because the future environment of plans is so complex, it would not be
profitable or realistic to make assumptions about every detail of the future
environment of a plan.
4 Identification of alternatives
Once the
organizational objectives have been clearly stated and the planning premises
have been developed, the manager should list as many available alternatives as
possible for reaching those objectives. The focus of this step is to search for
and examine alternative courses of action, especially those not immediately
apparent. There is seldom a plan for which reasonable alternatives do not exist,
and quite often an alternative that is not obvious proves to be the best. The
more common problem is not finding alternatives, but reducing the number of
alternatives so that the most promising may be analyzed. Even with mathematical
techniques and the computer, there is a limit to the number of alternatives
that may be examined. It is therefore usually necessary for the planner to
reduce by preliminary examination the number of alternatives to those promising
the most fruitful possibilities or by mathematically eliminating, through the
process of approximation, the least promising ones.
5 Evaluation of alternatives
Having
sought out alternative courses and examined their strong and weak points, the
following step is to evaluate them by weighing the various factors in the light
of premises and goals. One course may appear to be the most profitable but
require a large cash outlay and a slow payback; another may be less profitable
but involve less risk; still another may better suit the company in long–range objectives. If the only
objective were to examine profits in a certain business immediately, if the
future were not uncertain, if cash position and capital availability were not
worrisome, and if most factors could be reduced to definite data, this evaluation
should be relatively easy. But typical planning is replete with uncertainties,
problems of capital shortages, and intangible factors, and so evaluation is
usually very difficult, even with relatively simple problems. A company may
wish to enter a new product line primarily for purposes of prestige; the
forecast of expected results may show a clear financial loss, but the question
is still open as to whether the loss is worth the gain.
6 Choice of alternative plans
An
evaluation of alternatives must include an evaluation of the premises on which
the alternatives are based. A manager usually finds that some premises are
unreasonable and can therefore be excluded from further consideration. This
elimination process helps the manager determine which alternative would best
accomplish organizational objectives.
6 Formulating of Supporting Plans
After
decisions are made and plans are set, the final step to give them meaning is to
numberize them by converting them to budgets. The overall budgets of an
enterprise represent the sum total of income and expenses with resultant profit
or surplus and budgets of major balance–
sheet items such as cash and capital expenditures. Each department or program
of a business or other enterprise can have its own budgets, usually of expenses
and capital expenditures, which tie into the overall budget. If this process is
done well, budgets become a means of adding together the various plans and also
important standards against which planning progress can be measured.
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