Planning involves a number of steps ranging from determining the objectives to follow-up action as detailed below.
The main steps that are taken in planning process are as follows:
1. Establishing Objectives:
Establishing the objectives is the first step in planning. Plans are prepared with a view to achieve certain goals. Hence, establishing the objectives is an important step in the process of planning. Plans should reflect the enterprise’s objectives. Objectives should clearly define as to what is to be achieved by policies, procedures, rules, strategies, budgets and programmes. Plan must make sure that every activity undertaken contributes to the achievement of objectives.
The objectives fixed 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 it is to be accomplished. That is, managers should be able to restate the objectives of the firm in definite and clear terms that will motivate examination and evaluation of performance against targeted performance in the plan. Objectives should be measurable.
2. Determining Planning Premises
This is the second step in planning. Premises include actual forecast data, policies and plans of the enterprise. Planning involves looking into the future which necessitates the enterprise to know, how future conditions will affect its activities. Thus, forecasting is an important step in planning. There are two types of forecasting namely,
Prediction of general economic conditions.
Prediction of market conditions for a specific product or service dealt with by the enterprise.
Keeping the general economic conditions in mind, a study of the industry is made. Then the manager proceeds to make a study of his company’s share of the market. Forecasting will reveal those areas where control is lacking. Planning will be reliable when the forecast methods are accurate. Hence, the success of the planning depends very much upon the forecasts.
3. Determining Alternative Courses
Determining alternative courses is the third step in the planning process. The planner should study all the alternatives, consider the strong and weak points of them and finally select the most promising ones.
4. Evaluating Alternative Courses
Alternative courses so selected should be evaluated in the light of premises and goals. Evaluation involves the study of performance of various actions. Various factors such as profitability, investment requirements, etc., of such alternatives should be weighed against each other. Each alternative should be closely studied to determine its suitability.
Many other factors such are uncertain future trend, problems faced financially, future uncertainties renders the evaluation process, complex and difficult. Usually, alternative plans are evaluated against factors such as cost, risks, benefits, organizational facilities, etc. Computer based mathematical plans and techniques can also be utilized to identify best course of action.
5. Selecting the Best Course
After having evaluated the various alternatives, the most suitable alternative is selected. With this, the plan can be considered to have been adopted. It is exactly the point at which decisions are made. Sometimes, in the best interests of the enterprise, several alternative courses can be adopted.
6. Formulating Derivative Plans
Planning is not complete as soon as the best course is selected. The main plan should be supported by a number of derivative plans. Within the framework of a basic plan, derivative plans are formulated in each functional area. Segregation of master plan into departmental, sectional and individual plans, helps to understand the real nature of future uncertainties. To make the planning process more effective, it should also provide for a feedback mechanism. These plans are meant for the implementation of the main plan.
7. Implementation of Plans
Implementation of plans is the final step in the process of planning. This involves putting the plans into action so as to achieve the business objectives Implementation of plans requires establishment of policies, procedures, standards, budgets, etc.
Infographic on Important Steps in Planning Process