The planning process involves the following steps :
1.Perception of opportunities :
This implies that management should take a preliminary look at possible future opportunities and see them clearly and completely. It should also know its standing in the light of its strengths and weaknesses. Besides, it should understand the reason for solving uncertainties and the outcomes which it expects. Setting realistic objectives depends on this awareness of opportunities.
2. Establishing objectives :
In the planning process, the second step is to establish objectives for the entire enterprise and then for each subordinate work unit. Objectives imply the expected results 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 network of strategies, policies, procedures, rules, budgets and programmes.
Many plans of the enterprise are directed by enterprise objectives. These major plans define the objectives of every department by reflecting the objectives of the enterprise. The objectives of subordinate departments are controlled by the objectives of major departments and so on. However, the subdivision managers should be given an opportunity to contribute their ideas for setting their own goals and those of the enterprise. By doing this, the objectives of the concern and of departments can be framed in a better way.
3. Establishing planning premises :
Planning premises are the various factors that affect planning. There are various factors which affect the organisational functioning like political factors, moral standards, government controls, prices, demand and availability of various factors of production. The important thing is that information is to be collected in respect of all these factors. Thus it can be said that planning premises are forecasts or the assumptions about the environment in which the plan is to be carried out. It is important for all the managers involved in the plan to agree on the premises. This agreement is necessary for coordinated planning.
A difficulty of establishing complete premises and keeping them up-to-date is that every major plan, and many minor ones, become premises for the future. As we move down the organisation hierarchy, the composition of planning premises changes to some extent. The basic process is the same, but old and new major plans will affect significantly the future against which managers of lesser units must plan. For instance, a superior’s plans affecting a subordinate manager’s area of authority become premise for the subordinate manager’s planning.
4. Determining alternative courses of action :
An action can be performed in several ways.
However, a particular way is the most suitable for the organisation keeping its limitations in view. The management should try to find out these alternatives. The common problem is not in finding alternatives, but in reducing the number of alternatives so that the best possible ones may be analysed. Even with mathematical techniques and the computer, there is a limit to the number of alternatives that may be thoroughly examined. So the planner must usually make a preliminary examination in the light of planning premises to discover the best possible course of action.
5. Evaluating alternative courses :
After finding out alternative courses and examining their strong and weak points, the next step in the planning process is to weigh them in the light of premises and objectives. But this step possesses a difficult problem because a particular alternative may be the best from one point of view but not from other points. For instance, one course may appear to be the most profitable but require a large cash while another may look less profitable but involve less risk. Because of these complexities, the operation research and mathematical and computing techniques have their primary application in evaluating these alternatives.
6. Selecting a course :
After evaluating the various alternatives the most fit alternative is selected. To this course of action is the point at which the plan is adopted. It is the real point of decision making. Sometimes an evaluation of alternative courses may disclose that two or more are advisable. Here the manager may decide to follow several courses rather than the best course.
7. Formulating derivation plan:
After deciding the course of action or in other words the basic plan, the next step is to derive supporting plans for various departments, units, activities, etc.
8. Numberising plans by budgeting :
After decisions are made and plans are set, the final step is to numberize them by converting them into budgets. The overall budget of an enterprise show the sum total of income and expenses, with resulting profit or surplus and budgets of major balance sheet items such as cash and capital expenditures. Each department or programme of a business can have its own budget, usually of expenses and capital expenditure, which are then tied into the overall budget.
If this step is carried out properly, budgets can support the various plans and also serve as standards against which planning progress can be measured.