Coordination Process

Coordination cannot be achieved by force or imposed by authority. Achieving coordination through executive orders is a futile
exercise. It can be achieved through person-to-person, side-by-side relationships. Achieving effective coordination is a
sequential process. It is possible only when the following conditions are fulfilled.

1. Clearly defined and understood objectives: Every individual and each department must understand what is
expected of them by the organisation. Top management must clearly state the objectives for the enterprise, as a
whole. As pointed out by Terry, “there must be commonness of purpose, in order to unify efforts". The various plans
formulated in the enterprise must be interrelated and designed to fit together.

2. Proper division of work: The total work must be divided and assigned to individuals in a proper way. Here, it is
worth noting the principle, 'a place for everything and everything in its place'.

3. Good organisation structure: The various departments in the organization must be grouped in such a way that
work moves smoothly from one phase to another. Too much specialisation may complicate the coordination work.

4. Clear lines of authority:- Authority must be delegated in a clear way. The individual must know, what is expected
of him by his superior(s). Once authority is accepted, the subordinate must be made accountable for results, in his
work area. There should be no room for overlapping of authority and wastage of effort(s).

5. Regular and timely communication: Personal contact is generally considered to be the most effective means of
communication for achieving coordination. Other means of communication such as records, reports, may also be
used in order to supply timely and accurate information to various groups in an organisation. fu far as possible,
common nomenclature may be used so that individuals communicate in the 'same language'.

6. Sound leadership: According to McFarland, real coordination can be archived only through effective leadership. Top
management, to this end, must be able to provide (i) a conducive work environment, (ii) proper allocation of work,
(iii) incentives for good work, etc. It must persuade subordinates, to have identity of interests and to adopt a common
outlook.

Techniques of Coordination
Managers use a variety of techniques for achieving coordination. The main ones include the following:

1. Sound planning: Planning is the ideal stage for coordination. Every member in the organisation must understand
fully how his job contributes to the overall objectives. To this end, objectives must be clearly defined. Policies, rules,
procedures must be stated in precise terms, so that members are able to ensure uniformity of action. The various
plans must be integrated ultimately, paving the way for coordination.

2. Sound and simple organisation: A sound and simple organisation is an essential condition of coordination. The
lines of authority and responsibility of each individual must also be spelt out. This helps in avoiding inter-personal
conflicts. Related activities must be grouped together and, departments created, carefully. These steps will go a long
way in facilitating coordination.

3. Chain of command: The chain of command states the relationship between a superior and a subordinate. Exercise
of authority through the chain of command or hierarchy is a traditional means of securing coordination. The various
activities are brought under the control of one boss, who has the authority to issue orders, instructions and secure
compliance. He can resolve conflicts by exercising his authority. By virtue of his position, a superior is able to resolve
differences and achieve coordination.
 4. Effective communication: Open and regular interchange of information facilitates understanding between
individuals and groups among whom coordination is to be achieved. Through effective communication, each and
every person understands his scope of activity and limits of functioning. If a result of such understanding, one can
ensure both horizontal as well as vertical coordination. Modern communication systems, such as computers, data-
processing equipment, facilitate the flow of communication across various individuals and departments quickly. This
helps managers in coordinating various activities, smoothly.

5. Special coordinators: In an organisation, where an executive finds little time to solve the problems of coordination,
he can hire a specialist for doing this task. Such a person is called 'special coordinator or independent integrator'. His
main task is to collect information regarding problems, analyze the same, list the various options and suggest
remedial steps. He can thus shape executive thinking and action along desired lines.

6. Sound leadership: Leadership is the ability of a manager to induce subordinates to work with zeal and commitment.
Effective leadership ensures coordination of efforts, both at the planning and implementation stage. A good leader
puts activities on the right track, and inspires subordinates to pull together for the accomplishment of common
objectives. He can persuade Them to adjust their behavior voluntarily, according to the needs of the situation
(voluntary or self-coordination). Through personal contact, he can bring about an atmosphere of mutual trust and
cooperation within the organisation. Whenever required, he can offer incentives to members and thereby reduce
conflicts. For instance, profit-sharing is helpful in promoting team-spirit and cooperation between employers and
employees.

Types of Coordination
On the basis of scope and flow in an organisation, coordination may be classified as internal and external vertical and
horizontal.

Internal and external coordination: Coordination between the different units of an organisation is called 'internal coordination'.
It involves synchronization of the activities and efforts of individuals, in various departments, plants and offices of an
organisation. The coordination between an organisation and its external environment, consisting of government, customers,
investors, suppliers, competitors, etc., is known as 'external coordination'. No organisation operates in isolation, In order to
survive and succeed; it must set its house in order, and interact with outside forces in a friendly way.

Vertical and horizontal coordination: Coordination between different levels of an organisation is called 'vertical coordination'. It
is achieved by top management, through delegation of authority. When coordination is brought between various positions, at
the same level in the organisation (i.e., between production, sales, finance, personnel, etc.) it is called 'horizontal coordination'.
Horizontal coordination is achieved through mutual consultations and cooperation.

Systems Approach to Coordination

The primary reason for coordination is that departments and workgroups are interdependent. They depend on each other for
information and resources to carry out their respective activities. The greater the interdependence between departments, the
more coordination, the organisation demands, if departments are to be able to perform effectively. According to Thompson,
there are three major forms of interdependence; pooled, sequential and reciprocal. Pooled interdependence means that each
department is part of the organisation and contributes to the common good, but each department is relatively independent
because work does not flow between units. State Bank of India branches or 'Wimpey’s restaurants are examples of pooled
interdependence. They share financial resources from a common pool but do not interact with each other. In sequential
interdependence, the output of one unit becomes the input for another, in a sequential manner; The first department must
perform correctly, so that the second department can perform correctly. Coordinating long-linked units requires careful
planning by the manager. It may be necessary to promote day-to-day communication among plants, so as to identify trouble
spots and prevent interdepartmental conflicts. Reciprocal interdependence exists when activities flow both ways between
units. This form is clearly the most complex. For example, hospitals employ resources from several departments (e.g.., x-ray,
Nursing, surgery physiotherapy, etc.) to restore a patient's health. Each specialist and department, supplies some of the
resources required to help the patient. Doctors and professionals from each specialized area meet to discuss the patient's
recovery. The method of coordination is mental adjustment, achieved through group meetings. Designing an organisation to
take care of reciprocal interdependence is not an easy task, Open communication and careful planning is essential. As Hellriegel
et a.1., remarked, "Because management cannot easily anticipate all customer demands or solve all the problems that arise,
managers must continually communicate face to face, to be sure that they understand the nature and scope of the
issues and problems and to devise solutions". One useful way to integrate various departments in an organisation, is to view
them as interrelated and interconnected parts of an open 'system'. The systems approach ensures better coordination by
considering an organisation as a system, consisting of different sub-systems. The output will be satisfactory and effective, when
the differentiated sub-systems are integrated properly through coordination. Because all the parts are interdependent, just like
parts in the human body, the performance of organisation requires proper functioning of all the sub-systems. when any of the
parts is not in order, then the total output is affected. Systems approach thus enables management to find out the loopholes in
the system and instantaneously rectify the particular sub-part, which is not in order. Through feedback and feed-forward
control system, an organisation is in a position to check the functioning of various parts in the organisation. Systems approach
thus ensures better coordination.

Summary
To achieve results, managers have to combine physical, financial and human resources in an effective and efficient way.
Coordination is a conscious and deliberate blending of activities to achieve unity of action. Cooperation is necessary to achieve
coordination. Cooperation refers to the willingness of people to help each other voluntarily.

Coordination is important to the success of any enterprise. It pulls all the functions and activities together, improves human
relations and increases inter-departmental harmony. Coordination is built around certain time-tested principles. Coordination is
easy to achieve through direct interpersonal relationships and communications. It should be initiated in the early stages of
planning. All departments and units must realize the inter-relatedness of their work, as in the case of an open system, and act
cooperatively. Coordination is a continuous process and is involved in every management function.

The process of coordination involves a series of steps: clear goals, proper allocation of work, sound organisation structure, clear
reporting relationships, proper communication and sound leadership. Special coordinators could also come in to fill the gaps, if
top management finds it difficult to solve the problems of coordination.

Review Questions
1. Define coordination. Explain the important features of coordination.

2. What is coordination? Briefly state the principles and techniques of coordination.

3. Briefly, outline the different types of coordination that exist in an organisation.

4. Write short notes on:

 Coordination vs. Cooperation
 Principles of Coordination
 Techniques of Coordination
 Systems approach to Coordination

5. Explain how coordination helps to increase the effectiveness of management.

Discussion Questions
 1. Management involves coordination and integration of all resources, to accomplish specific results". Explain.

2. coordination is the very essence of management'. Do you agree? Give reasons.

3. coordination is the outcome of information and cooperation,. Discuss.

Skill Building Exercise

You have just landed a job, as the Administrative officer to the CEO of Vision (VTL), soft Technologies Ltd a rapidly growing
technology firm. You joined the organisation with an intention to know more about how high-tech firms are managed.
VTL had tremendous success with its new product launches, in recent times,Bank soft,, banking for firms and 'trade vision' for
broking firms. VTL has also come our, recently with a high resolution video screen for selling with personal computers, that is
selling better than expected. In a rapidly changing competitive environment since the firm is growing very fast, the CEO is
finding it difficult to divide his precious time between long range planning and day to day administrative matters. For eg in a
number of recent extences sales were made but no attention was paid to receivables side. In another case, although
production was expanded to meet the growing demand no one alerted the department to hunt for talent in IITs. The CEO's
office, in both cases failed to coordinate the various parts in time. To compound the problems further, the CEO is also
particularly concerned about the over dependence of the firm on just two products. He wants to develop new
products quickly, before others move in to fill the gaps, especially for retailing, insurance and health care industries.

The CEO asks you to develop some ideas about how to achieve better coordination of the company’s various activities, (both
vertically and horizontally) and also foster innovation. VTL is currently organised into a functional structure with major
departments in the following areas: manufacturing, sales, human resources, finance, accounting and engineering. VTL currently
has about 750 employees.

Planning and Forecasting 5

Re. 1 sachet story
In 1983, a 20-something chemistry student, Ranganathan set out to sell shampoos with Rs 15,000 in his pocket. It was a market
with 200 brands, lorded over by the big daddy of them all, Hindustan Lever Ltd. From the beginning, Ranganathan knew that
millions of people outside the great Indian middle-class could not afford a Rs 6a shampoo, but they could afford a Re 1 sachet.
After clearly visualizing this gap, he created the 'Chik' sachet and began selling the same on bicycle. To boost up sales, he came
out with a brilliant idea that "Return five shampoo sachets and get one Chik free". The idea clichéd in frugal rural households of
Tamilnadu. Volumes tripled, the revenues took care of distribution and the brand name stuck. The liberalization measures of
1990s helped him grab every opportunity to expand his market to every nook and corner of India. He began advertising first in
regional satellite channels and consolidated his brands - Chik, Nile (herbal shampoo) Fairever fairness cream - in the Southern
markets before launching them nationally. His company Cavinkare (a synonym of beauty and grace in Tamil literature) is now a
k 205 crore group with a personal products division, a polyether division and an export division. In a market dominated by
Multinationals, Ranganathan created his own space through careful, elaborate planning of what prompts buyers to go after a
product. In a capital - hungry, labour - surplus market he found the answer. Find a novel cost-effective product and position it in
such a way that cannot be easily challenged. The chemistry student has already taught some great marketing lessons to
multinational and is currently busy developing a perfume for everyone at as low a price as Rs 5! As Ranganathan has proved,
even small firms can grow and prosper in a tough environment if they are able to exploit their unique ideas (strengths?)
through proactive thinking and careful planning.

Introduction
The necessity for planning arises because of the fact that business organizations have to operate, survive and progress in a
highly dynamic economy where change is the rule, not the exception. The change may be sudden and extensive, or it may be
slow and almost imperceptible. Some of the important forces of change may be: changes in technology, changes in population
and income distribution, changes in the tastes of consumers, changes in competition, changes in government policies etc. These
changes often give rise to innumerable problems and throw countless challenges. Most of these changes are thrust on
managers thus, managers are forced to adjust their activities in order to take full advantage of favorable developments or to
minimise the adverse effects of unfavorable ones. Successful managers try to visualise the problems before they turn into
emergencies. As pointed out by Terry, "successful managers deal with foreseen problems, and unsuccessful managers struggle
with unforeseen problems. The difference lies in planning." Managers charged with the responsibility of achieving definite
targets, do not wait for future. They make the future. They introduce original action by removing present difficulties,
anticipating future problems, changing the goals to suit the internal and external changes, experiment with creative ideas and
take the initiative, attempting to shape the future and create a more desirable environment.

MEANING

A plan is a forecast for accomplishment. It is a predetermined course of action. It is today's projection for tomorrow's activity. In
other words, to plan is to produce a scheme for future action, to bring about specified results at a specified cost, in a specified
period of time. Management thinkers have defined the term, basically, in two ways:

 Based on futurity: "Planning is a trap laid down to capture the future" (Allen). "Planning is , deciding in advance what
is to be done in future" (Koontz). "Planning is informed anticipation of future" (Hayman). "Planning is 'anticipatory'
decision-making" (R.L. Achoft).

 As a thinking function: "Planning is a thinking process, an organised foresight, a vision based on fact and experience
that is required for intelligent action" (Alford and Beatty)

"Planning is deciding in advance what to do, how to do it, when to do it and who is to do it."
(Koontz and O'Donnell)

It is deciding in the present, what is to be done in future. It is the process of thinking before doing. A plan is a specific,
documented intention consisting of an objective and an action statement. The objective portion is the end, and the action
statement represents the means to that end. Stated another way, objectives give management targets to shoot at, whereas
action statements provide the arrows for hitting the targets. Properly conceived plans tell what, where and how something is to
be done.
Features of Planning
Planning has a number of characteristics:

1. Planning is goal-oriented: All plans arise from objectives. Objectives provide the basic guidelines for planning
activities. Planning has no meaning unless it contributes in some positive manner to the achievement of
predetermined goals.

2. Planning is a primary function: Planning is the foundation of management. It is a parent exercise in management
process. It is a preface to business activities. According to Koontz, "Planning provides the basic foundation from which
all future management functions arise". Terry also supported the view, that "without planning there is nothing to
organise, no one to motivate and no need to control". The idea of primacy of planning emphasizes the fact that
planning takes precedence over other managerial functions like organising, directing and controlling because none of
these functions can come into being until there is a plan.

3. Planning is all-pervasive: Planning is a function of all managers. It is needed and practiced at all managerial levels.
Planning is inherent in everything a manager does. Managers have ro plan before launching a new business. They
have to plan whenever things change. Even when they decide to close down a plant, they have to plan meticulously to
avoid problems from employees. The scope of planning, however, differs at different levels and among different
departments.

4. Planning is a mental exercise: Planning is a mental process involving imagination, foresight and sound judgment.
Planning compels managers to abandon guesswork and wishful thinking. It makes them think in a logical and
systematic manner. Plans are based on a careful study of internal and external factors influencing business activities.

5. Planning is a continuous process: Planning is continuous. It is a never-ending activity. Once plans for a specific period
are prepared, they are translated into action. At the end of that period, there is a need for a new plan to be drawn
based on new situations and conditions. Planning, is thus, an ongoing process of adjustment to change. There is
always need for a new plan to be drawn on the basis of new demands and changes in the circumstances.

6. Planning involves choice: Planning essentially involves choice among various alternative courses of action. If there is
one way of doing something, there is no need for planning. The need for planning arises only when alternatives are
available. Planning presupposes the existence of alternatives. From out of these alternatives, a manager would select
the best alternative, after careful analysis and evaluation.

7. Planning is forward looking: Planning means looking ahead and preparing for the future. It means peeping into the
future, analysing it and preparing for it. Managers plan today with a view to flourish tomorrow. Without planning,
business becomes random in nature and decisions would become meaningless, adhoc choices.

8. Planning is flexible: Planning is based on a forecast of future events. Since future is uncertain, pl4ns should be
reasonably flexible. The onset of colour television sets forced many manufacturer in the 'West to abandon production
of black and white television sets long back. 'when market conditions change, planners have to make necessary
changes in the existing plans. According to Koontz and O'Donnell, "effective planning requires continual checking on
events and forecasts and the redrawing of plans to maintain a course towards a designed goal".

9. Planning is an integrated process: Plans are structured in a logical way wherein every lower level plan serves as a
means to accomplish higher level plans. They are highly interdependent and mutually supportive.

10. Planning includes efficiency and effectiveness dimensions: Plans aim at deploying resources economically and
efficiently. They also try to accomplish what has been actually targeted. The effectiveness of plans is usually
dependent on how much it can contribute to the predetermined objectives.
Planning Questions
Planning is deciding in advance what to do, how to do it, when to do it and who is to do it. It bridges the gap from where we are
to where we want to go. It is the function that answers four basic questions, as shown in Figure 5.1.

1. Where are we now?: This question is concerned with making a realistic assessment of the current situation and
forecasting how the picture may change in the future.

2. Where do we want to be?: This is concerned with finding out the desirable objectives, keeping The present as well as
future requirements in mind.

3. Gap? : What is the amount of difference between where we are now and where we want to be?

4. How can we get there from here?: This is a question of deciding in the present what has to be done in future.
Planning is concerned with future implications of current decisions, not with decisions to be made in the future.

Steps in the Planning Process

Planning is a vital managerial function. It is intellectually demanding. It requires a lot of time and effort on the part of planners.
They must adopt a systematic approach so as to avoid pitfalls, errors and costly mistakes which may upset the whole business
later on. Such a systematic approach may consist of the following steps:

1. Establishing objectives: The first step in the planning process is to identify' the goals of the organisation. The internal
as well as external conditions affecting the organisation must be thoroughly examined before setting objectives. The
objectives so derived must clearly indicate what is to be achieved, where action should take place, who is to perform
it, how it is to be undertaken and when is it to be accomplished. In other words, managers must provide clear
guidelines for organisational efforts, so that activities can be kept on the right track.

2. Developing premises: After setting objectives, it is necessary to outline planning premises. Premises are assumptions
about the environment in which plans are made and implemented. Thus, assumptions about the likely impact of
important environmental factors such as market demand for goods, cost of raw materials, technology to be used,
population growth, government policy, etc. on the future plans are made. The demand for fuel efficient vehicles in
the late 1980s has compelled virtually all automobile manufacturers in India to go in search of collaborative
agreements with foreign manufacturers from Japan, Germany, USA, etc. Plans should be formulated by the
management, keeping the constraints imposed by internal as well as external conditions in mind.

3. Evaluating alternatives and selection: After establishing the objectives and planning premises, the alternative courses
of action have to be considered. Liberalisation of imports and the use of high technology in recent times has
encouraged manufacturers to produce colour television sets, electronic sets, electronic equipments, videos,
computers, fuel-efficient vehicles, etc. Thus, changes in government policy, technology, competition, etc. pose several
alternatives before manufacturers, from time to time, regarding the product they should manufacture. Such
alternatives have to be carefully evaluated against factors like costs, associated risks involved, benefits likely to arise,
availability of spare capacity, etc. The pros and cons as well as the consequences of each alternative course of action
must be examined thoroughly before a choice is made.

4. Formulating derivative plans: After selecting the best course of action, the management has to formulate the
secondary plans to support the basic plan. The plans derived for various departments, units, activities, etc., in a
detailed manner are known as 'derivative plans'. For example, the basic production plan requires a number of things
such as availability of plant and machinery, training of employees, provision of adequate finance, etc. To ensure the
success of a basic plan, the derivative plans must indicate the time schedule and sequence of performing various
tasks.
 5. Securing cooperation and participation: The successful implementation of a plan depends, to a large extent, on the
whole hearted cooperation of the employees. In view of this, management should involve operations people in the
planning activities. Suggestions, complaints and criticisms from operating personnel help management rectify the
defects in plans and set things right in the beginning itself. Involvement of subordinates in planning has the unique
advantage of getting a practical view of those closer to the scene of operations. According to Koontz, 'plan: have to be
set in an atmosphere of close participation and a high degree of concurrence'. Participation enables employees to
give their best to plans. They are also motivated to carry outhit plan to the best of their ability.

6. Providing for follow-up: Plans have to be reviewed continually to ensure their relevance and effectiveness. In the
course of implementing plans, certain facts may come to light that were nor even thought of earlier. In the light of
these changed conditions, plans have to be revised' Without such a regular follow-up, plans may become out-of-date
and useless. N4oreover, such a step ensures the implementation plans along right lines. Management can notice
shortcomings in time and initiate suitable remedial steps. A continuous evaluation of plans also helps to develop
sound plans in future, avoiding mistakes that have surfaced while implementing the previous plans.

Approaches to Planning

Managers follow various approaches to planning based on the extent of participation, authority delegation and competency
level of managers working at various levels, namely:

1. Top-down approach: In most family-owned enterprises, authority and responsibility for planning is centralised at the
top. The top management defines the mission, lays down strategies, specifies action plans to achieve the stated
goals. The blueprint is then passed on to the people working at lower levels, who have very little to contribute to the
process of planning. The success of this approach is wholly dependent on the qualifications, experience and
capabilities of people working at the top level.

2. Bottom-up approach: Thinking and doing aspects in the planning process are two sides of the same coin. So, if lower
level managers are drawn into the preparation and implementation of plans, their loyalty and commitment would go
up automatically. Participation enables them to give their best to the plan document.

3. Composite approach: In this approach, a middle path is chosen to facilitate the smooth implementation, of the plans.
the top management offers guidelines, sets boundaries and encourages the middle and lower level executives to
come out with tentative plans. These are put to discussion and debate. Once approved, such plans gain acceptance
readily since everyone has been drawn into the exercise.

4. Team approach: the team approach is slightly different from the composite approach. In this, the job of planning is
assigned to a team of managers having requisite experience in various functional areas. They prepare the draft plans,
taking internal as well as external factors into account. The tentative plans are forwarded to the top management for
approval. The expertise, experience, and capabilities of functional heads is executed into action in such a participative
climate.

Principles of Planning

To be useful, planning should try to incorporate some of the time-tested and inter-related principles,
Beautifully summed up by Koontz the:

1. Principle of contribution to objectives: Every plan should help in the achievement of organisational objectives.
 2. Principle of primacy of planning: Planning precedes all other managerial functions. It is the first and the foremost
function to be followed in the Process of management.

3. Principle of pervasiveness of planning: Planning is an all-pervasive function. It is important to all managers regardless
of their level in the organisation.

4. Principle of flexibility: By flexibility of a plan is meant its ability to switch gears, change direction to adapt to changing
situations without unnecessary cost (ability to vary product mix, shift marketing effort geographically, raise additional
funds on favourable terms, reshuffle and relocate personnel quickly, change organisation structure etc.).

5. Principle of periodicity: Plans should be integrated and interconnected in such a way as to achieve the stated
objectives economically and efficiently. A manager should review events and expectations regularly; refine and
redraw the plan and keep it on track.

6. Principle of planning premises: Every plan is based on carefully considered assumptions, known as planning premises.
"The more the individuals charged with planning, understand and agree to utilise consistent planning premises, the
more coordinated enterprise planning will be".

7. Principle of limiting factor: while choosing an appropriate course of action among different alternatives, the limiting
or critical factor (such as money, manpower, machinery, materials, management) should be recoginised and given
due weightage. When ignored, the critical factor would seriously impact the process of planning and make it
impossible to achieve goals.

Importance of Planning
Planning is an essential activity carried out in all organisations in the modern world. No organisation can achieve its goals
without planning. Planning helps in determining the goals of an organisation and the activities needed to satisfy these goals. If
organisations are operating on a day-to-day basis with no feel of where they are heading, the results will be haphazard. It is like
sailors lost at sea in a rowboat. They feel helpless just sitting there, so they row, not having any idea where their rowing will
take them. Planning helps an organisation in the following ways:

1. Planning provides direction: Planning provides direction and a sense of purpose for the organisation. \(/ithout plans
and goals, organisations merely react to daily occurrences without considering what will happen in the long-run. Plans
avoid this drift situation and ensure that short-range efforts will support and harmonize with future goals. It helps an
organisation decide what to do and when to do it. It reduces aimless activity and makes action more meaningful.

2. Planning provides a unifying framework: Planning forces people to continually address their efforts to the most
important work rath.er than the least important. In the absence of a plan, unifying focus on company objectives may
be missing. A plan tells everyone what the organisation hopes to achieve and what the contribution of each
department must be, and who is to utilise resources to achieve the goals. Plans serve as the basis of coordinating the
efforts of different divisions, departments and people. In the absence of a plan, the organisation would be pulled in
different directions, creating confusion and misunderstanding at various levels.

3. Planning is economical: Effective plans coordinate organizational work and eliminate unproductive effort. Guess work
is banished. Facilities are employed to the best advantage. Waste motions and idle facilities are removed. In the
words of Koontz and, O'Donnell, "Planning substitutes jointly directed efforts against uncoordinated, piecemeal
activity an even flow of work for an uneven flow, and deliberate decisions for snap judgments". By focusing attention
on what is to be done, how and when it is to be done, plans helps an organisation to utilise its physical and human
resources in an economical way. This, ultimately, leads to efficiency of operations.

4. Planning reduces the risks of uncertainty: Planning helps an organisation to cope with an uncertain future. It helps
management to anticipate the future and prepare for the risks by making necessary provisions to meet the
unexpected turn of events. Planning enables a manager, in the words of Drucher to affect rather than accept the
future. In the absence of a plan, the organisation is much more likely to sit back and let things happen and then react
 to these happenings in a crisis mode. Planning minimises the chances of mistakes and unpleasant surprises because
objectives, policies and strategies are formulated after a careful scrutiny of internal as well as external environment.
Planning, thus, seeks to minimise risk while taking advantage of opportunities. It keeps management alert to
environmental changes, and manages the uncertain future in a useful way.

5. Planning facilitates decision making: Decision-making involves searching of various alternative courses of action,
evaluating them and selecting the best one. Planned targets serve as the criteria for the evaluation of different
alternatives so thar the best one may be chosen. If there are no plans for the future, there are few guidelines for
making current decisions. For. example, decisions have to be made in present for a product to be introduced three
years in the future. $7hen future plans exist, decisions consistent with the future plans are made. Further, without
plans, people will make decisions according to their own preference rather than those of the organisation.

6. Planning encourages innovation and creativity: Planning involves looking ahead and preparing for the future. The
process of looking ahead, forces an organisation to be alert of opportunities and threats in the environment. It forces
managers to find our new and improved ways of doing things in order to remain competitive and avoid the threats in
the environment. It compels the managers to be creative and innovative all the time. Planning helps managers to
visualise problems early and take suitable remedial steps. It helps them encase opportunities and come out as
'winners' in a competitive world.

7. Planning improves morale: Once members know what is expected of them, they can contribute better. when goals
are properly defined, work assignments can be fixed and everyone can begin to contribute to the achievement of
these goals. This produces improvements in morale. Further, planning permits employees to participate in the
thinking process. This helps them develop a broad mentality. Also, when the plan is actually translated into action,
they feel that it is their own plan. Positive attributes are, thus, developed. There is less friction between departments
and there is greater personal involvement and commitment to the plan. Planning improves the behavioral climate in
the organisation.

8. Planning facilities control: Planning and controlling functions are said to be 'Siamese twins' (inseparable wins). There
is nothing to control without planning and without proper control, planning Proves to be a wasteful and an
unproductive exercise. Plans serve as yardsticks for measuring performance. They help in channelizing behaviour in
the right direction. They help in preventing mistakes, over-sights and deviations.

Planning in a Changing Scenario

The topic questions the validity of planning in a fast changing environment. The utility of planning in the face of continual
change (political, economic, social, religious, cultural, competitive, technological) is open to doubt' In view of such changes, the
plans, policies and procedure., have to be revised from time to time' If we do not move along with the times, and perpetuate
the status quo arrangements, we might miss the bus, History is replete with examples where business that have refused to fall
in line have had to bite the dust, and face the prospect of extinction. Failure to take note of customer expectations regarding
fuel efficiency has sounded the death knell of 'Ideal Java' in the two-wheeler models in the recent past. Inability to ward off
threats initiated by the public sector, private sector and foreign banks compelled the once market leader Diners Club India to go
out of the credit card business (sold to Citibank now) completely. At the same time, in an attempt to get along with the tide, if
we keep on changing the contents of plans, time and again, the exercise might prove to be counter-productive. we are neither
here nor there. So, we are caught between two extremes, rigidity at one end, flexibility at the other. Which way to go?

PAYOFFS OF PLANNING IS AN UNCERTAIN CORPORATE

WORLD
The payoffs of planning are real and genuine. Consider the following:
 1. It helps managers to think about the future seriously. It forces planners to look into the future, evaluate the impact of
various factors on enterprise functioning and profitability The planners then develop a plan containing inbuilt escape
routes in case of trouble.

2. Planning helps managers in minimising the risks, arising out of an uncertain future event. It helps managers to ward
off the threats by venturing into new areas. The recent policy changes, in respect of duty structure relating to metal
scrap has changed the fortunes of sponge iron manufacturers in India. Some were caught napping; while others
(especially the market leader Essar Gujarat) have quickly initiated steps to reduce the damage (effecting cost
reduction drives, changing their corporate plans). The receding fortunes of fertilizer industries has forced many a
player to venture into areas such as chemicals, cement, etc. Environmental uncertainty makes planners more
cautious. They keep everything ready, so that in case their plans do not succeed or go off track, they are ready with
alternative plans, or courses of action. Planning helps managers face all future challenges with determination and
courage.

3. Proactive planning pays in the long-run. Environmental engineering firms, oil drilling and rigging units (Essar Oil, EPIL)
fuel-efficient motor car scooter manufacturers (Maruti Udyog, Hero Honda), offer us endless success stories as to
how their proactive planning helped them reap a rich harvest even in hard times. Planning helps managers to take
advantage of opportunities quickly. An uncertain future has both a positive and negative side. On the positive side, if
we are ready with a plan anticipating future events, we can exploit the idea fully and emerge as market leaders. On
the negative side, if events do not go as we visualized, w-e can switch gears without losing much in the process.

Planners, no doubt, cannot control the future. But they should attempt to identify and isolate present actions and
their results, that can be expected to influence the future. Instead of meeting each crisis as it arises, they must try to find out
the threats and opportunities in the environment and prepare for them in a systematic way. Planning, thus, is not simply an
attempt to predict the future, it is also an attempt to control it. As rightly pointed out by a writer "Planning is a deliberate
attempt to influence, exploit, bring about and control the nature, direction, extent, speed and effect of change".

Primacy of Planning

Planning is the foundation of management. Planning provides the basis from which all future management functions
arise. Without the activities determined by planning, there would be nothing to organise, no one to motivate and no need to
control. Planning logically precedes the execution of all other managerial functions. It is the means for organised action, an
essential prerequisite for success in other areas, especially, control. Unplanned actions cannot be controlled or any attempt to
control without a plan is meaningless. Planning process must be conducted in direct relation to the needs of control.

According to Koontz, planning has an unique role to play in the performance of other functions. OF course, it should
be noted that the various functions of management are interconnected so, that no one function can exist without the others.
Moreover, if we take the control function, the data supplied by controlling activities are used widely in subsequent planning.
The idea of primacy of planning emphasis the primacy planning over all other managerial activities such as organising, staffing
directing policy making and controlling because none of these functions can come into being until there is a plan planning
provide purpose and incentive to the efforts of those in the organisation' without it, work becomes aimless and wasted, and
morale decays.

This reasoning supports the view that planning is relatively more important than other managerial functions for the successful
functioning of the organisation. Although poor performance in any area is undesirable, planning errors in go to the very heart
of the organisation. Serious mistakes or omissions in planning can never be rectified by effective organising or controlling.
According to Terry "No manager can organise, actuate, and control successfully over a period time unless he has planned."
Limitations of Planning
Planning is not always on the credit side of the ledger. It is not a panacea for all organisational ills. Mere planning does not
guarantee success because it is not a substitute for human action and judgment. The limitations of planning can be examined
under the following headings:

a) Rigidity: Plans put the activities of an enterprise in a rigid framework. Everything is spelt out in detail and deviations
are not permitted. New opportunities are often ignored or rejected because of the commitment to existing plans.
Once established, policies and procedures become ingrained in an enterprise and changing them may become an
impossible task. Events may change but plans ma1' remain fixed. Managers, too, would be reluctant to reorient their
plans suitably. Planning, after all, is hard mental work and no executive would like to discard the old plans in favour of
new ones, even when circumstances demand. So, a mindset has already been established, and maintaining a fresh
and objective viewpoint is difficult.

b) Costly and time consuming: Planning is costly. It is expensive in terms of time spent to formulate the plans, the
manpower required to do the planning and resources needed to execute the plan. The collection of information,
evaluation of alternatives, selection of a suitable course of action, etc., may consume lot of executive time and
organisational resources.

c) Employee resistance: For any plan to succeed, you need operating people to understand it, embrace it, and make it
happen. One of the frequent complaints made against the planning Process is that it is done by specialists who are
not in touch with operations. As a result, operating people who are not involved in planning tend to resist the
planning process. Planning 'imposed from above' often leads to resentment and resistance from those forced to
execute.

d) False sense of security: Elaborate planning may create a false sense of security in the organisation. Managers may
begin to feel that everything is well taken care of. They begin to assume that as long as plans are adhered to, there
will not be any problems. As a result, they fail, to take note of environmental changes and the need to review,
restructure and reorient the old plans in an appropriate way.

e) Managerial deficiencies: Planning is an intellectually demanding function. Since managers are assessed on the basis
of results, they begin to discount long-range plans, and adopt short-ra.rge plans which would put them in a
comfortable position. This may harm organisations interests in the long-run. Planning involves lot of paper work and
hard mental labour. Most managers may not like to undergo such a painful process which, ultimately may nor
produce results. Further, planners may be lacking in specific skills in a right way, yet inspiring and enthusing people all
along' In such cases also, the utility of planning is seriously standard. plans, as we know, can be only as good as the
planners. Managerial deficiencies often come in the way of formulating appropriate plans and developing the right
climate.

f) Planning prevents innovation: Planning demands commitment to written policies, procedures and rules etc. It
restricts a manager unnecessarily to defined areas, The executive is prevented from experimenting with novel ideas,
venturing into risky but profitable areas and exploring the untested yet lucrative grounds. The answer given by Allen
to this objection interesting reading. "To require a manager to avoid overlapping the responsibilities of another no
matter how innovating his ideas may be, is not more than asking the violinist in the orchestra to stick to his music
while the pianist confines himself to that of his own instrument. This can hardly be said to hamper the desirable
creativity of either."

g) External Limitations: It is quite often remarked that 'planning is a ritual in a fast changing environment'. This
statement subscribes to the fact that planning is an empty academic exercise in the face of a highly competitive and
turbulent environment.
  Difficult to Predict: It is difficult for planners to forecast economic conditions, government policies, competitive
maneuvers or human behaviour with any degree of accuracy. Planning, basically depends on a whole set of assumed
conditions. Only when these assumptions are substantially correct, planning produces fruitful results.

 Projected too far into the future: Moreover, the reliability of planning efforts is open to doubt since they are
projected farther into the future, where the manager has no control over environmental forces.

 Environmental turbulence: Future is a moving target. It may not be possible to anticipate future changes accurately
and provide for them in plans. Uncertainty and unpredictability the hallmarks of business environment-reduce the
usefulness of planning and forecasting. Competition turns the best laid human plans into waste paper. Economic,
political and technological revolutions force corporate planners to revise the plans day in and day out. Sometimes,
there is a revision in plans even before their implementation. In the face of a highly volatile and turbulent
environment, plans become obsolete documents and fail to guide the destinies of the organisation. And, it is
extremely difficult for the organisations to buffer themselves against environmental instability no matter how
carefully and effectively the planning exercises are done.

 Emergency situations: The utility of planning is further discounted, in the face of emergencies like strikes, lockouts,
industrial disasters like the one that recently took place in Chemical Plant in Bhopal, Madhya Pradesh (India). In such
instances, plans are completely upset, decisions made hand-to-mouth,

It is true that planning is not a sure bet. It is not a palliative for all organisational ills. A fast changing environment reduces the
accuracy of planning efforts and forces their revision even before their implementation. But one should remember that it is
only difficult but not impossible, to forecast future changes. Once you are able to plan for contingencies, necessary steps can be
taken to minimise the impact of unfavorable market conditions.

It is no use reacting to the crisis as and when they arise. When events are left to chance, there is no room for an organisation to
survive in a competitive world. Any good plan has built-in-contingencies and several alternatives. The real pay-off in planning
arises from the search and identification of contingencies only. The search causes planners to consider the impact of non-
recurring events and evaluate their potential influence on the organization. As and when such events take place, the
organisation is happily placed to face the challenges, Instead of steering a blind course, the planners have something to fall
back upon and weather out the storm. One of the great pay-offs of planning is that it helps a manager command the future
rather than being commanded by it.

Effective Planning
According to Koontz and O'Donnell, the following steps have to be taken in order to make planning effective:

(i) Climate: Planning must not be left to chance. Additionally, conducive climate must be provided so that activities proceed
smoothly and systematically. Top managers should remove obstacles to planning, by establishing clear cut goals, realistic
planning premises and offering required information and appropriate staff assistance at various levels.

(ii) Top management support: Planning must start at the top. It must receive attention of the top management continually.
They must be willing to extend a helping hand, whenever required.

(iii) Participation: Plans are implemented by people. So, it is necessary to secure acceptance and commitment from them. One
way to increase commitment is to solicit subordinates' participation in the planning process. Planning comes alive when
employees are involved in setting goals and determining the means to reach them.

(iv) Communication: Goals, premises and policies must be properly communicated to people. People must know what they are
supposed to do, when, how and where. The time limits must also be communicated in advance.

(v) Integration: Different plans must be properly balanced and integrated. They must support each other and should not work
at cross purposes. Every attempt should be made to ensure that the payoffs of planning ate more than the costs involved.
(vi) Monitoring: Plans must be subjected to regular appraisal and review, so as to take note of internal as well as external
changes. Better to keep the plan flexible to the extent possible.

 SIX RULES OF PLANNING IN LEARNING ORGANISATIONS

Learning organisations, now-a-days, follow six rules of planning. A learning organisation is one in which everybody is engaged in
identifying and solving problems, enabling the organisation to continuously experiment, change and improve. Thus, increasing
its capacity to grow learn, and achieve its purpose. The essential idea is problem solving as opposed to the traditional
organisation designed for efficiency.

 Strong mission: Employee commitment and involvement are critical in helping companies compete in today's rapidly
changing world. A compelling mission (a broadly stated definition of the organisation's basic business scope and
operations that distinguish it from similar types of organisations) often serves to increase employee commitment and
motivation as well as offer a guide for planning and decision making. Most successful companies ('Wal-Mart, 3M,
General Electric, Johnson & Johnson, Infosys, Hindustan Lever) are guided by a 'core ideology' - values and a sense of
purpose that go beyond just making money and also provide a guide for appropriate behavior.

 Stretch goals: Stretch goals are highly ambitious goals that are clear, compelling and imaginative in concept and
functionally fuel progress. Stretch goals compel everyone to think in new ways. For example, Motorola used stretch
goals to improve quality. Leader’s first set a goal of a tenfold increase in quality over a two-year period. Once this goal
was met, they set a new stretch goal of a hundred-fold improvement in quality over four years.

 Learning environment: In all learning organisations, employees do not rest on past laurels. They quesrion the status
quo. Constant questioning opens the gates to creativity and learning.

 Vital information: In a learning organisation, planning experts should focus more on gathering vital pieces of
information from different quarters. Rather than simply looking for the 'right answers', they should offer information
with a view to broaden the consideration of issues and support strategic thinking.

 Improvement; a way of life: Participation in planning effort encourages employees to continuously learn and grow,
thus helping the organisation improve its capability

 Planning still starts and stops at the top: Top management shows the way, clarifies goals, clears the paths and
implements certain plans. It takes the final responsibility for success or failure.

Forms of Planning
Even though the basic process of planning is the same for every manager, planning can take many forms and styles in practice.
Planning may be undertaken in an elaborate way or done in a limited manner. It may be done by a gallery of intellectuals using
modern forecasting techniques or it may be undertaken in a 'seat-of-the-pants' manner by a number of executives sharing their
thoughts over a cup of tea. Planning may begin at the top with executives deciding on targets and passing them down for
implementation; or it ma1' be undertaken in a participative manner, inviting people designated at various levels to come
forward with constructive ideas and useful suggestions. Thus, there are many forms and varieties of planning. The planning
practices, further, are likely to differ from organisation to organisation. One useful way of looking at the whole aspect is to
distinguish between long-range planning and short-range planning or strategic planning and operational planning. Other forms
of distinction, that follow are outlined for academic purpose only. In actual practice, the distinctions suggested may not surface
in such a neat and clear-cut manner.
  LONG-RANGE PLANNING (LRP) vs. SHORT-RANGE PLANNING
(SRP)

Long-range planning covers a relatively long period of time (anything over a five-year period), and affects many
departments/divisions of the organisation. It includes the formulation of overall broad objectives and the selection of
appropriate means by which the objectives are to be achieved. LRP is quite common in stable industries such as steel, public-
utilities and automobiles. In India, public sector companies generally adopt the national planning period of five years. LRP is the
result of a series of interrelated steps: (i) The first basic step is the estimation of the international, national and local situation.
The possible future changes that might take place, in areas external to an organisation are examined. (ii) The second step of LRP
is defining the goals to be pursued by the organisation and the philosophy to be adopted. (iii) The third step in LRP answers the
simple question: where are we now? For this, an objective assessment of the degree of success in accomplishing goals, on a day
to day basis, is made. (iv) In the fourth step, an attempt is made to find out the strong or weak spots in the company's
programmes rill date in the light of additional information on sales, selling expenses, production targets, capital inflow, etc. The
deficiencies are rectified promptly. (v) Now a full blown programme of longer range planning is developed and approval is
sought for its adoption. (vi) The last step is concerned with placing LRP into work, to reduce ambiguity and achieve some
measure of specificity. LRP is divided into action plans, that is, intermediate and short-term plans for the sake of convenience
and easy implementation.

UNCERTANITY-THE REASON FOR LONG RANGE PLANNING

Long-range planning is necessary precisely because we cannot forecast the uncertain future. It is essential even though the
eventuality for which plans are prepared is not likely to occur. Is it not foolhardy to stop military planning simply because the
planner must operate under conditions of uncertainty? This is doubly true in the case of business organisations, for a failure to
plan may have serious consequences on its survival and growth in future. The business executives should not always sit back
and wait for lightning to strike. Even in times of emergency and adversity, long-range planning is important. It is important
because a planned contraction of operations is less costly and disruptive than a make-shift contraction. It is true, that accurate
planning beyond one year is difficult and long-range plans are very likely to be changed before completion. Nevertheless, they
definitely serve a purpose in setting up an orderly approach to the problems of long-range growth of the company. The
consequences of taking a short-term perspective can be severe. The US automobile industry lost a large share of the market (28
% by 1980) to imported cars because of an earlier failure to focus on the long-term need to develop fuel-efficient vehicles.
Long-range planning helps in preparing in an orderly manner for future events. It opens up new avenues, new ways of doing
things and reveals specific opportunities, previously unknown to the planner. It helps in seeking new opportunities actively,
instead of merely rearing defensively to competition. In fact, a study by Ansof clearly shows that strategically planned
companies outperformed the non-planners. Stagner studied 109 firms and found that those companies that used their top
managers in long-range planning consistently obtained better results than those that did not have a strong planning activity.
The evidence furnished in other studies is equally strong. There is a good reason for confidence in long range planning. And
there is no ,substance in argument Long range planning is useless in the face of uncertainties.

Long-range planning is not forecasting. Forecasting is of little use to planners who seek to direct their organisations to the
future. It is does not provide an adequate basis even for purely adaptive behaviour. The answer for this dilemma lies in long-
range planning. Long range planning is much more than a mere projection of trends. It is that activity in a company which sets
long-range goals for the firm and then proceeds to formulate specific plans for attaining these goals. Long-range planning
attempts typically to grapple with the question "what must our company do, today to be ready for the uncertainties of
tomorrow." It does not deal with future decisions. It deals with the futurity of Present decisions. What an organisation should
do tomorrow is not important or relevant. what is more important is an answer to the question: what do we have to do today
to be ready for an uncertain tomorrow? Thus, long-range planning is a risk-taking decision-making. There is no attempt
to mastermind the future.

SHORT-RANGE PLANNING OR OPERATIONAL PLANNING

Short-range planning covers a period of one to twelve months, depending on the nature of business and the traditions
prevailing in the industry. Short-range plans are otherwise called operational plans. They are usually made in a
specific and detailed manner. The emphasis is on flexible budgets, on goals and targets, expressed in a clear and
precise language. The primary concern is efficiency (doing things right) rather than effectiveness (doing the right
things). To this end, short range plans gather information, evaluate alternatives and select the most suitable course of
action. Operative plans provide content and form to long-range plans. In fact, short-range planning is an extension of
long-range corporate plans. Market plans, production plans and financial plans are typical examples of operational
planning.

Long-range planning and short-range planning are expressions of the breadth of planning periods. The terms, short
term and long term, sometimes present an erroneous picture because people generally associate short term with a
narrow perspective and long term with a broad view

The time dimension of planning cannot be reduced to simplified expressions such as short term or long term. The
time span varies usually depending on the factors like industry characteristics, market demand, availability of
resources and skills, environmental complexities, etc. what may appear to be long-range planning, in the case of one
company may turn out to be short range planning in the cases of other companies.

OPERATIONAL PLANNING vs. STRATEGIC PLANNING

Strategy refers to the ideas, plans and support that firms employ to compete successfully against their rivals' Strategy is meant
to help firms achieve competitive advantage. Broadly speaking, competitive advantage is what allows a firm to gain an edge
over its rivals (superior design skills, quality, distribution network, after sales service, low cost manufacturing etc.).

Unlike short-term planning, strategic planning involves an extended time of a substantial percentage of organisational
resources, a wide spectrum of eventual impact. Basically, strategic planning is planning that is conceptually and functionally
long-term, wide ranging and critical to organisational success, in terms of costs of the resources it affects and of the outcomes it
envisions.

The important features of operational and strategic plans are summarized through the following table:-

 TACTICAL OR COORDINATIVE (INTERMEDIATE)

PLANNING

Tactical plans are less detailed than the short-range plans. They are concerned with implementation of strategic
plans by coordinating the work of different departments in the organisation. They try to integrate various
organisational units and ensure commitment to strategic plans. Based on the results obtained by implementing short-
range plans, a mid-term review is undertaken. A moving average is usually obtained and the success or failure of
operational plans is assessed and the need for readjustment is indicated. Coordinative planning, thus, helps in
shifting the gears, whenever pitfalls occur while implementing the short-range or long-range plans.

 FORMAL AND INFORMAL PLANNING

A formal plan is a well documented plan. It is a written record of what the organisation intends to do within a time
frame. The record is made after a careful evaluation of all relevant factors that have a bearing on organisational
functioning. Managers at various levels are deliberately involved in the formulation and implementation processes. It
is systematic and rational. Informal planning does not offer a written record. It is carried out without any direction.
Managerial thoughts which do not find expression on Paper are informal plans. It encourages managers to evade
responsibility. Unhealthy tendencies like carelessness in planning and implementation, haphazard. Actions, loss of
memory and direction might creep in. It should be followed as an exception rather than a rule.
  FUNCTIONAL AND CORPORATE PLANNING

Functional planning is 'unit planning'. It deals with parts such as production, marketing, finance, manufacturing in an isolated
manner. There is no unified focus. As a risk, functional planners develop a 'parts mentality. ‘They, often, fail to see the total big
picture. The impact of inte.nal as well as external factors may not be fully taken care of, in respect of functional planning.
Corporate planning outlines the broad objectives of the company as a whole and develops plans designed to meet those
objectives. It has both the micro-as well as macro focus. The various functional plans are integrated so as to meet the broad
objectives of the organisation. It is integrative in nature. It takes a long-term view. It tries to strike a balance between
organisational resources and environmental challenges. In the process, tendencies like adhocism, parts-mentality, narrow
functional outlook, friction between units are kept under constant control. The focus is always on overall organisational
performance

 PROACTIVE AND REACTIVE PLANNING

Proactive planning is a way of thinking about managing the future risks and challenges. It tries to take care of all future
contingencies and changes. Plans are often tied to a time-frame. Within this period (say2year period), many changes may occur
and upset all projections and calculations. Proactive planning makes managers alert and sensitive to all such changes. They are
forced to be dynamic, active and creative. Instead of reacting to events passively, managers are ready with alternate plans and
actions, redefining and reshaping the future. It helps managers to challenge the future rather than accept the same meekly. It is
chiefly concerned with initiating actions today so as to survive and grow tomorrow.

In reactive planning, the organisation merely reacts to external events. The organisation is left to the vagaries of environmental
forces. Automobile companies that found that fuel efficiency is going to be the most important demand of customers in
eighties have registered consistent growth all these yeas whereas those companies that did not visualize this in advance are no
more in existence in the market now (remember Fiat, Ambassador cars?). In a fast changing world, reactive planning may prove
to be costly. Before we realize what has happened, we might be shown the door. Managers, as rightly pointed out by Drucher,
should not wait for future. They have to make future by initiating

Planning and Controlling: Relationships

Planning involves selecting enterprise objectives and then finding ways to achieve them. Controlling is the process of assuring
that actions are in line with planned results. The relationship between the two terms could be stated thus:

 Plans are the directors in which managers intend to lead the organisation in order to achieve its objectives. Controls
are needed to ensure that results are consistent with plans

 Planning prescribes described behaviours and results. Controls can maintain or redirect actual behaviours and results.

 Managers cannot effectively plan without information about the past and current status of each department,
product, etc.. Much of this essential information is obtained through the control Process' It provides valuable
information derived from past experience and allows managers to plan effectively in future' It helps managers to
learn from past mistakes and plan well.

 Managers cannot effectively control the organisation unless there are plans to indicate the Purpose to be served by
the control process. Thus, the planning and control pro...r., complement and support one another.
  MISCONCEPTION
One of the glaring misconceptions in management stares that futurity is the essence of planning and controlling is nothing but a
postmortem examination of past events. Admittedly, planning is deciding in advance what is to be done in future. It is today's
projection of tomorrow's activity. it provides a scheme for future action, to bring about specified results at specified cost, in a
specified-period of time' Instead of meeting each crisis when it arises, planners actually try to find out threats and opportunities
in the environment and prepare the organizations to face the challenges with confidence . Planning, thus, is not simply an
attempt to predict the future, it is also an attempt to control it. As Drucher pointed out, managers do not wait for future, they
make the future though intelligent anticipation and careful planning.

Controlling, on the other hand, is not an examination of past events. It is rightly said that the starting point of planning is
control. Controlling helps in the adoption of new plans and revision of existing plans on the basis of actual performance against
standards. It provides information about past and current status of each department, product, etc. in the organisation and
enables managers ro plan the future changes. Managers, thus, learn through past mistakes and plan effectively. Controlling
aids in future planning. Like planning, controlling is also forward looking.

Forecasting :- Introduction
Business forecasting is a systematic attempt to probe the future, so as to recognise problems and opportunities and turn them
into plans of action. Business forecasting helps in analysing the economic, political and market information to reduce the risks
involved in making business decisions and long-range plans. Forecasts make managements think ahead and give singularity of
purpose to planning by concentrating attention on the future. Business forecasting involves a 'look ahead' approach in business.
A systematic attempt is made to look into all the influential factors (past andpresent), affecting the working of the
organisations. Based on the analysis of these factors, through sophisticated statistical and econometric techniques, a reliable
calculation of probabilities about the future is made.

 Essential elements business forecasting: Redfield, in a famous article in Harvard Business Review, identified four
essential elements in business forecasting.

 Developing the groundwork The known and available information regarding the growth of the company, the industry
in which the company is positioned, the growth of the product lines of the company, etc., is put to investigation in the
first stage. The basic purpose is to prepare a ground work on which future predictions can be based.

 Estimating future business: Against the backdrop of the information collected, an estimate of future prospects of
business is made by management. The trends are projected by management after a step-by-step procedure where
the information is put to close scrutiny and analysis. These probable trends should not be taken as absolute guides to
executive action, they can be taken as intelligent guesses at this stage.

 Comparing the actual with estimated results: To ward off dangers arising from wrong anticipation, a periodic
comparison of actual with estimated results is made at this stage. The forecast provides the measurement apparatus
and helps in tracking down reasons for major differences resulting in unanticipated gains/losses.

 Refining the forecast process: The above three-step process helps executives in gaining proficiency in constructing
dependable forecasts. As time progresses they are able to refine, sharpen and adjust the forecasting techniques to
meet the changing needs of business.

 RELATIONSHIP, BETWEEN PLANNING AND FORECASTING

Planning and forecasting are closely related to each other. Planning is deciding in advance what is to be done in future. Futurity
is in its essence. But, future is uncertain and risky. Planners, in majority of cases, do not know with certainty the conditions
which will exist in the future, when activities will take place etc. As a result, they are forced to make certain assumptions
regarding future. This is forecasting. Forecasting provides pertinent information for successful planning. Planning without
forecasting proves to be wasteful and useless. Fayol aptly remarked that "the plan is synthesis of the various forecasts: annual,
long-term, short-term, special etc." Forecasting is the essence of planning. In fact, forecasting is so essential to sound planning
that it would not be an exaggeration to state that the success of the plan depends, in large measure, upon the validity and
accuracy of the forecast.

FORECASTING AS AN AID TO PLANNING

Forecasting plays an important role in managerial planning. Unfortunately, the importance of forecasting efforts is rarely
recognized. It is frequently pointed out that "the only certain thing about a forecast is that it will be wrong." It is true that no
forecast can be so reliable that it can tell the future. Forecasting is nothing but a prophesy to the future, the future which is
highly volatile and uncertain. The element of error and risk is inevitable. But, there is no way of escaping this. The best
alternative would be to make use of the existing forecasting instruments in a judicious manner, in a discriminating way allowing
for the risk factor involved and plan accordingly. In our daily actions, some amount of forecasting is inevitable. The man who
starts a business makes an assessment of a future demand for its products. The man who determines a production programme
for the next six months or twelve months is usually also basing it on some calculation of future demand. The man who engage
staff and particularly young staff, usually has an eye to future organisational requirements. The very fact that so many people
(meteorologists, politicians, managers) employ this instrument bears ample testimony to the fact that it is an invaluable guide
to steer people to suitable actions. Forecasts do not have to be 'right' to be useful. In spite of all its limitations, business
forecasting is immensely useful and therefore unavoidable. Without business forecasting, individuals as well as organisations
pre at the mercy of future events. Forecasts are key aids to planning in the following ways:

 Forecasts offer pertinent information regarding future.

 Forecasting helps in bringing a singleness of purpose to planning, that cannot exist easily otherwise.

 Forecasting improves the quality of managerial planning. For example, if a company is able to anticipate the future
requirements of customers, it can plan and develop new products in an appropriate way. Forecasting helps in
minimising the costly planning errors. Forecasting also helps in preparing the organisation for future crisis and
emergencies. The organisation, through adequate planning measures, can buffer itself against many, if not all, of
these unexpected changes. It may be as a impossible to evolve necessary shock absorbers completely guard against
business cycles but at least their impact can be fairly assessed, and the unfavorable consequences can be minimised.

 Forecasting supplies vital information regarding the weak spots in the organisation thereby paving the way to
appropriate control. Once such areas are spotted, it is easy for managers to establish check posts for effective control
and sound planning thereafter.

Advantages of Forecasting
Although business decision-makers should neither accept any forecast as infallible nor rely exclusively on it, they would be well
advised to give forecasts a significant weight in their own planning due to the following reasons:

 Forecasting is the essence of planning. Forecasts are the premises or basic assumptions upon which the manager's
planning and decision-making are based. They supply vital facts and pertinent information for successful planning.
Planning without forecasting is an impossibility.

 Forecasting forces executives to look ahead, think through the future and improve their mental faculties.

 Forecasting helps in achieving better coordination by focusing attention on the future. It helps in ensuring a
singleness of purpose to planning and objectives'
  Forecasting, by revealing the weak spots in the organisation, helps in ensuring control wherever it is lacking and
thereby improves performance'

 Effective forecasting helps in identifying the environmental forces and assists in providing for these challenges though
in an imperfect way. 'Without business forecasting, individuals as well as organisations are at the mercy of future
events'

Limitations
Forecasts are only estimates of future conditions and not indicators of actual position. Future rs shrouded by
shadows of uncertainty. It is quite possible that, because of uncertainty, the best possible plan may result in losses
and a bad plan in profits. Obviously, forecasting for eventuality that do not occur is inefficient. Moreover, it is
extremely difficult to map out all the future possibilities and several burning issues may still be hanging in the fire.
Uncertainty always places severe limitations on the efficacy of foretasting. Forecasting suffers from the following
limitations:

1. Rule of thumb forecasts only a successful forecast is something of a miracle and often occurs for wrong reasons.
Prophesies of future events is hazardous and in the case of business undertakings operating in highly volatile and
turbulent environments, forecasting is meaningless. Uncertainty always places severe limitations on forecasting.

2. Unreliable: Forecasting is based largely on predictions and assumptions. Guesswork, however perfectly made, cannot
eliminate the margin of error, the possibility of mistakes. That is why, it is frequently remarked, "The only certain
thing about a forecast is that it will be wrong."

The primary problem with forecasting is that too much is expected of forecasting. People want more precise answers,
foolproof evidence than are possible in an environment characterized by uncertainty. fu things stand now, the forecasting
techniques too, have not been fully developed, and there is no fool proof method of predicting the future. Forecasting is more
of an art than a science. Its success largely depends on how skillfully it is put into practice, how effectively the forecasting
techniques have been made, etc. A forecast, to be effective, should consist of much more than a fanciful guess at a magic
figure.

 Techniques of Forecasting
According to L.S. Silk, three techniques are commonly employed in business forecasting: deterministic techniques, symptomatic
techniques and systematic techniques.

1. A Deterministic techniques: Deterministic techniques assume that there is a close causal connection or a rough
identity between present and future. These techniques are employed to forecast particular elements such as capital
spending, consumer expenditure, general business conditions, etc. The principal deterministic techniques are:

a) Latest information: According to this method, based on the very latest information, it is assumed that the existing
conditions or trends will continue for some time into the future. Obviously, it is a naive method, lacking in sound
theoretical basis. There is no guarantee that the present is a copy of the past. Such forecasts are made for very short
periods.

b) Knowledge of program, or limits: In this method, a number of important factors having a bearing on the economic
future are determined in advance. It is assumed, after a careful analysis, that these factors either remain stable or
change at a foreseeable rate in the forecast period, e.g., capital budgets of large organisations, government
expenditures on goods and services, tax provisions, industrial capacities, minimum wage legislation, etc.
 c) Spotting the beginning of a lengthy process: In this method,. the close relationship between initial and later stages of
an economic process is examined. In several cases, the trends in the economy which have started at a particular point
of time will continue for a long period.. For example, contracts for constructing residential houses precede actual
construction, new orders or unfilled orders of manufacturers largely determine production. In these cases, there is no
perfect relationship between initial and later stages of the process (as, for example, construction work may be
deleted or contracts may be cancelled) but a close relationship certainly exists which allows forecasting to be done
with a reasonable degree of success

d) Diagnosing people’s expectations: Here, the present customers and potential customers are asked to project their
buying intentions in a coming period. Based on the total market share expected, management can then estimate
future sales.

2. Symptomatic techniques: Symptomatic techniques are based on the assumption that turning points in economic
activity are spotted out from the information collected on national and industrial indices. Based on these significant
changes in business activity over a period of time and based on the information collected, the future trends are
predicted.

3. Systematic techniques: Systematic techniques of forecasting are derived from the classical approach of economic
theory. The cause and effect relations among different economic factor, which hold relevance for past, present and
future, are ascertained and forecasts are then constructed. This method calls for theoretical training, knowledge of
institutional and statistical facts, technical skill and social and political insight. Generally, two approaches are
employed in this type of forecasting:

a) Intuitive approach: In this method, the information regarding various economic factors is collected and put to
analysis. The analyst by using his judgment and experience, summarises the main factors, draws inferences and then
constructs various forecasts. The forecasting job is done continuously and forecasts revised as and when necessary.
(on the basis of fresh information). Forecasts, thus, are not produced by exact mathematical techniques but are based
on the analyst's conclusions. Success in this method largely depends on the analyst's skill, patience, insight,
forecasting talent and information.

b) The econometric approach: Econometric models are more rigorous and scientific in tackling the forecasting problem.
They reflect the wisdom contained in the disciplines of economics, mathematics, statistics and accounting. These
models express the relationship among a number of variables associated with changes in sales volume, in
mathematical terms. Through a computer a predictive model is developed from a theory or a set of theories that will
determine general business activity. The descriptive model is turned into a predictive model by independent
regression equations. The demand for new cars in a coming year might, for example, be a function of current year
income levels, development of new cars in the previous years, the cost of the existing models during the last two or
three years, the duty structure etc. If such a relationship exists, and can be stated in mathematical terms, a sales
forecast for demand for new cars can be made. Econometric models are as effective as their assumptions because
this technique demands the services of forecasting experts with sufficient background in quantitative techniques,
especially in computer technology.

ECONOMIC FORECASTING METHODS

Economic forecasting is one of the common types of external forecasting. The basic aim of economic forecasting is to predict
business fluctuations, i.e., fluctuations in general economic activity. Depending on the nature of the business, these fluctuations
affect the success or failure of business in various ways. The same trend which depresses one organisation might make another
flourish.

How to conduct economic forecasting? There are numerous factors known as indicators such as interest rates, stock prices,
Level of employment, and many others which are frequently employed to measure the extent of economic activity in a nation.
However, the single most important indicator is the gross national product (GNP). GNP is the value of goods and services
produced in the country in a year. The following methods are commonly employed to forecast the future of GNB which vitally
affects the conditions of many organizations in an economy:
 1. Extrapolation: The simplest form of economic forecast is that of extrapolation, which is simply a projection of the
current trend into the future. It merely projects the trend of the past. If a company is able to sell Rs 1,00,000 worth of
goods in 1990, Rs 2lakhs in 1991, 3lakhs in 1992, Rs 4 lakhs in 1993, It can safely estimate that growth increments of
Rs I lakh per annum will continue for the rest of the decade. Extrapolation is generally used to forecast such things as
industry growth, population trends, national income, etc., where changes take place slowly. However, where the
fluctuations are intense and abrupt, extrapolation may be of little use. Further, extrapolation ignores the influence of
such factors while presenting the trend forecast like sudden changes in consumer tastes and preferences, e.g., (the
demand for readymade garments) technical innovations (e.g., the demand for fuel-efficient cars, scooters etc.),
changes in political climate, etc.

2. Lead and lag method: In this method, the historic behaviour of various indicators is studied. The purpose is to find out
whether the indicating factor has regularly moved in advance of the general business trend (lead group), or has
moved simultaneously with it (coincident group) or has lagged behind it (a lag group). On the basis of the major
turning points in economic activity, the forecasts are developed.

3. Econometrics: This is a mathematical approach in which the main variables are joined together in a series of
equations. It can then be forecasted on the basis of the assumptions developed from these equations.

SALES FORECASTING METHODS

Sales forecast is a projection of the expected sales. Sales forecasting supplies vital facts and crucial information necessary for
constructing other plans in the organisation. Questions like how many goods an industry should sell, to whom, at which place,
and by what methods, can be answered by means of a sales forecast. A survey of the company's sales records indicates the
'best sellers' of the company so far, the profitable areas where the product is readily accepted, the type of customers preferring
the products of the company, etc. Various methods are employed in sales forecasting:

1. Jury of executive opinion method: In this approach, the views and opinions of top executives are brought together
for the purpose of constructing the sales forecast. This is a method based on opinion rather than on facts. Forecasts
are only intelligent guesstimates about the future under this method.

2. Grassroots method: In this method a survey of the sales force is undertaken, their own assessment of sales effected
and pooled together by the company are put to analysis on the basis of which the sales forecasts are developed later
on. The estimates of company sales force regarding the future prospects of company products are taken into account
while constructing the sales Forecasts. The basis of assumption is that because of their intimate connection with the
marker, sales people are in a better position to assess the performance of the company and its products in the
market. Every salesman is required to furnish the forecasts of sales in his area for the coming year to the company's
regional or head office. These estimates are pooled together and compared with the forecast constructed by the
home office staff. Allowance is also made for the impact of changes in managerial policies regarding advertising,
price, etc on general sales. The result is a composite forecast. The information obtained from salesmen operating at
the Grassroots level is more reliable. Ivory tower estimates may not be as accurate as the estimates made by persons
who have a better insight of the market.

3. User expectation survey method: In this method, sample surveys of customer's expectations are conducted in
selected market areas by sales people in order to determine the sales forecast for the product. However, this is not a
reliable method because quite often consumers contradict themselves, and to remove these limitations if a large
sample is selected the benefits may not be commensurate with the costs involved.

4. Quantitative method: Methods like trend projections (based on past information, present trends are outlined),
econometric models (a predictive model expressing the relationships among a number of various variables associated
with changes in sales volume in mathematical terms) are also used to construct sales forecasts these days.