Importance and Limitation of Planning – Introduction to Management (ITM)

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importance of planningImportance and Limitation of Planning
Principles of Management (POM)
Third Semester | Second year
BSc.CSIT | Tribhuvan University (TU)

Importance of Planning
Planning is a process of setting goal, establishing a course of action, implementing the action plans and attaining the goals. It is the primary function of the management of every organization. It affects all the functions of management. It is the key factor of a manager to organize activities, people, and resources effectively and efficiently. Planning is when a person thinks of something is to be done & prepares ways to perform the activity. Planning has great importance in business organization and can be understood briefly by following points below;

  1. Focus on goal:Planning helps to draw the attention of the managers and employees to the defined objectives. It defines clear link of action and responsibility. It facilitates in bringing unity in action and coordination among all the units of works.
  2. Reduces uncertainties:Planning helps to forecast the future events and anticipate future uncertainty.  It reduces the risks and uncertainties caused by change in business environment. It helps in developing strategies and action plans that are necessary to overcome the uncertainties.
  3. Maintain effective control:The control function of management is directly linked to planning. It helps to evaluate the actual achievement and identify the deviation between planned and actual performance. It makes control effective and meaningful.
  4. Promotes innovation and creativity:Planning encourages innovation thought and creative action among the managers. It contribute in motivating and developing among employees. It contribute in developing innovative ideas and creative actions.
  5. Improves organizational efficiency and effectiveness:Planning is selecting but course of action from various alternative courses. It deals with maximum productivity and minimum cost of output. It helps in utilizing available resources in the best possible way.
  6. Avoids business failure:The basic motive of planning is to overcome business failure. Strategies and plans are developed overhand to avoid the problems. Thus it reduces business failure.

Limitation of Planning

  • Inaccuracy:The information and variables of plan have to be updated frequently which is not always possible. The longer the plan period, the lesser the accuracy and reliability of information. The planning involves forecasting for long-term future.  As the overall environment change, the past information becomes meaningless over time.
  • Expensive process:It requires extra efforts and time for collecting information, evaluating the alternative and forecasting. Experts have to be hired to evaluate the alternative and selecting the best course of action. Extra budget have to be managed beside the normal investment.
  • Ineffective:Planning is only as good as the inputs used. In the time of emergencies, planning has no meaning as on-the-spot decisions are taken. Confusion among the manager about different dimensions and expectation, ultimately affects effective plan implementation.
  • Based on certain assumptions:Plans are formulated on the basis of certain assumptions. When premises do not remain the same, the overall plan of the organization is affected.
  • Based on actions:Thinking and deciding is advance, is slow intellectual exercise, therefore it will likely to delay in action. During emergencies and crisis period, organizational plans have to be abandoned. Many managers may not have the sufficient time for such exercise.
  • Incomplete information:The manager may not be able to collect the required information needed for planning. The information may not be available in time an it’s reliability trends to be suspicious. Sometimes, the information and assumptions on which the plan is based may change.
  • False sense of security:The variables used for planning keep on changing and management may not include the changes in plans. This promotes false sense of security against uncertainty or risks.
  • Rigidity:With change in environment, plans have to be reversed frequently. So managers and employees find it frustrating.

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