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Summary Planning in a business
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PLANNING• Planning gives direction to the organisation.
• It forces managers to be future-oriented and enables the organisation to deal with changes in
the business environment. In this chapter, we briefly explain the benefits and costs of planning
in organisations.
BENEFITS AND COSTS OF PLANNING
• Managers need to know which way to go and direction planning provides that direction.
BENEFITS OF PLANNING
• Planning has many benefits, and the more turbulent the environment, the greater necessity for
planning.
• Managers cannot predict the future; the planning exercise cannot change the business
environment and no plan can be perfect.
• However, managers can plan to steer the organisation in the best possible direction,
• taking into consideration the organisation's internal strengths and weaknesses.
• Good managers understand that although they are leading the organisation in a predetermined
• direction, they should anticipate change in the environment, and adjust their goals and plans
accordingly when necessary.
PLANNING PROVIDES DIRECTION
• The most important function of planning is that it gives direction to the organisation in the form
of goals and plans. By establishing where the organisation is heading (goals) and formulating
plans to attain these goals,
• managers ensure that the organisation is both effective (providing products or services that the
market wants) and efficient (providing products and services at the lowest cost).
PLANNING REDUCES THE IMPACT OF CHANGE
• The process of goal-setting and planning is, by definition, future oriented.
• Managers continually scan the environment to anticipate change that may affect the
organisation in the future.
• They plan for the organisation to benefit from opportunities and to avoid threats, thereby
reducing uncertainty, guesswork and the risks caused by change.
PLANNING PROMOTWS CO-ORDINATION
Planning focuses all activities in an organisation in one direction:
• to attain the organisation's goals effectively and efficiently. If all the members of the
organisation are aware of the goals they must meet, they can co-ordinate their activities. This
will foster co-operation and teamwork.
PLANNIG ENSURES COHESION
• The increasing complexity of organisations and the interdependence of all the parts of
organisation emphasise the necessity of planning to ensure cohesion.
, • Planning enables top management to see the organisation as a total system in which the goals
of all the different parts of the organisation are reconcilable with each other as well as with the
primary goals of the organisation as a whole.
PLANNING FACILITATES CONTROL
• Control is the process by which management ensures that the actual organisational activities
are compatible with the predetermined goals and planned activities.
• Control enables management to measure actual performance against set goals and plans, and
to take corrective action if significant deviations occur.
• During the planning process, managers formulate organisational goals and plans at various
levels of the organisation. These goals and plans later facilitate control. Without planning,
control cannot take place.
THE COSTS OF PLANNING
• Despite the obvious benefits of planning. it can also result in the following costs to the
organisation.
Planning may create rigidity
• Managers may not be inclined to deviate from set plans, even when changes in the
environment may require flexibility in terms of planning.
Planning consumes management time
• Planning is time-consuming and may require substantial portion of the valuable time and
energy of managers.
Formal plans may replace intuition and creativity
• The formal planning process can turn into a programmed routine and subsequently diminish
the vital role of creativity and intuition in planning.
Planning could cause delays in decision-making
• Planning could shift the focus in an organisation from performing to evaluating, resulting in a
delay in making crucial decisions regarding environmental changes that influence the
organisation.
MANAGERIAL GOALS AND PLANS
• On a personal level, most people are quite familiar with setting goals and formulating plans.
• The managerial function of planning in organisations is similar, as it comprises the same two
components.
• First, managers need to ask the question:
• Where do we want this organisation to be at aspecific future date? (This will entail setting
goals.) Then they need to ask: How will the organisation achieve its goals? (This will entail
formulating plans.) Thus, the concept of planning incorporates two components: determining
the organisation's goals and developing plans to achieve these goals.
• Against this background, an organisationa goal (or objective) can be defined as 'a desirable
state of affairs that an organisation aims to to achieve at some point in the future.
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