The steps in the planning process are such 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 planning process 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 be-cause 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 are 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 organization stands in the light of its strengths and weaknesses, an understanding of why the organization 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 organization 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 organizational 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 organizational objectives should be specified in all key result areas. Key result areas are those, which are important for organization in achieving its objectives. These are identified on the basis of organizational objectives.
For example, for an organization, key result areas may be profitability, sales, research and development, manufacturing, and so on. Once organizational objectives are identified, objectives of lower units and subunits can be identified in that context. Organizational objectives give direction to the nature pf all major plans, which, by reflecting these objectives, define the objectives of major departments. These, in turn, control the objectives of subordinate departments, and soon down the line. Thus, there will be hierarchy of objectives in the organization.
3. Planning Premises
After determination of organizational goals, the next step is establishing planning premises, that is, the conditions under which planning activities will be undertaken. Planning premise is 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 organization’s policies, resources of various types, and the ability of the organization 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 utilize consistent planning premises, the more coordinated planning will be. Forecasting 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 organizational 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 sub-ordinate manager’s area of authority become premises for the latter’s planning.
4. Identification of Alternatives
Based on the organizational 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 organization 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 organizations, or taking over another organization, and so on. Within each category, there may be several alternatives. For example, diversification itself may point but the possibility of entering into one of the several fields.
The most common problem with alternatives is not that of 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 organization, 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 crore.
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 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.
7. Formulation of Supporting
Plans. After formulating the basic plan, various plans are derived so as to support the mall1 plan. In an organization 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 plan more concrete meaning or implementation.