Which is the most important function of management planning?

Planning is the first and most important function of management. It is needed at every level of management. In the absence of planning all the business activities of the organisation will become meaningless. The importance of planning has increased all the more in view of the increasing size of organisations and their complexities.

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Planning has again gained importance because of uncertain and constantly changing business environment. In the absence of planning, it may not be impossible but certainly difficult to guess the uncertain events of future.

The following facts show the advantages of planning and its importance for a business organisation:

(1) Planning Provides Direction:

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Under the process of planning the objectives of the organisation are defined in simple and clear words. The obvious outcome of this is that all the employees get a direction and all their efforts are focused towards a particular end. In this way, planning has an important role in the attainment of the objectives of the organisation.

For example, suppose a company fixes a sales target under the process of planning. Now all the departments, e.g., purchase, personnel, finance, etc., will decide their objectives in view of the sales target.

In this way, the attention of all the managers will get focused on the attainment of their objectives. This will make the achievement of sales target a certainty. Thus, in the absence of objectives an organisation gets disabled and the objectives are laid down under planning.

(2) Planning Reduces Risks of Uncertainty:

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Planning is always done for future and future is uncertain. With the help of planning possible changes in future are anticipated and various activities are planned in the best possible way. In this way, the risk of future uncertainties can be minimised.

For example, in order to fix a sales target a survey can be undertaken to find out the number of new companies likely to enter the market. By keeping these facts in mind and planning the future activities, the possible difficulties can be avoided.

(3) Planning Reduces Overlapping and Wasteful Activities:

Under planning, future activities are planned in order to achieve objectives. Consequently, the problems of when, where, what and why are almost decided. This puts an end to disorder and suspicion. In such a situation coordination is established among different activities and departments. It puts an end to overlapping and wasteful activities.

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Consequently, wastages moves towards nil, efficiency increases and costs get to the lowest level. For example, if it is decided that a particular amount of money will be required in a particular month, the finance manager will arrange for it in time.

In the absence of this information, the amount of money can be more or less than the requirement in that particular month. Both these situations are undesirable. In case, the money is less than the requirement, the work will not be completed and in case it is more than the requirement, the amount will remain unused and thus cause a loss of interest.

(4) Planning Promotes Innovative Ideas:

It is clear that planning selects the best alternative out of the many available. All these alternatives do not come to the manager on their own, but they have to be discovered. While making such an effort of discovery, many new ideas emerge and they are studied intensively in order to determine the best out of them.

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In this way, planning imparts a real power of thinking in the managers. It leads to the birth of innovative and creative ideas. For example, a company wants to expand its business. This idea leads to the beginning of the planning activity in the mind of the manager. He will think like this:

Should some other varieties of the existing products be manufactured?

Should retail sales be undertaken along with the wholesales?

Should some branch be opened somewhere else for the existing or old product?

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Should some new product be launched?

In this way, many new ideas will emerge one after the other. By doing so, he will become habituated to them. He will always be thinking about doing something new and creative. Thus, it is a happy situation for a company which is born through the medium of planning.

(5) Planning Facilitates Decision Making:

Decision making means the process of taking decisions. Under it, a variety of alternatives are discovered and the best alternative is chosen. The planning sets the target for decision making. It also lays down the criteria for evaluating courses of action. In this way, planning facilitates decision making.

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(6) Planning Establishes Standards for Controlling:

By determining the objectives of the organisation through planning all the people working in the organisation and all the departments are informed about ‘when’, ‘what’ and ‘how’ to do things.

Standards are laid down about their work, time and cost, etc. Under controlling, at the time of completing the work, the actual work done is compared with the standard work and deviations are found out and if the work has not been done as desired the person concerned are held responsible.

For example, a labourer is to do 10 units of work in a day (it is a matter of planning), but actually he completes 8 units. Thus there is a negative deviation of 2 units. For this, he is held responsible. (Measurement of actual work, knowledge of deviation and holding the labourer responsible falls under controlling.) Thus, in the absence of planning controlling is not possible.

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