Advantages and Limitations of Planning

Advantages of Planning:

Planning is one of the crucial functions of management. It is basic to all other functions of management. There will not be proper organization and direction without proper planning. It states the goals and means of achieving them.

Above all other things, planning is important for the following reasons:

1. Attention on Objectives:

Planning helps in clearly laying down objectives of the organization. The whole attention of management is given towards the achievement of those objectives. There can be priorities in objectives, important objectives to be taken up first and others to be followed after them.

2. Minimizing Uncertainties:

Planning is always done for the future. Nobody can predict accurately what is going to happen. Business environments are always changing. Planning is an effort to foresee the future and plan the things in a best possible way. Planning certainly minimizes future uncertainties by basing its decisions on past experiences and present situations.

3. Better Utilization of Resources:

Another advantage of planning is the better utilization of resources of the business. All the resources are first identified and then operations are planned. All resources are put to best possible uses.

4. Economy in Operations:

The objectives are determined first and then best possible course of action is selected for achieving these objectives. The operations selected being better among possible alternatives, there is an economy in operations. The method of trial and error is avoided and resources are not wasted in making choices. The economy is possible in all departments whether production, sales, purchases, finances, etc.

5. Better Co-ordination:

The objectives of the organization being common, all efforts are made to achieve these objectives by a concerted effort of all. The duplication in efforts is avoided. Planning will lead to better co-ordination in the organization which will ultimately lead to better results.

6. Encourages Innovations and Creativity:

A better planning system should encourage managers to devise new ways of doing the things. It helps innovative and creative thinking among managers because they will think of many new things while planning. It is a process which will provide awareness for individual participation and will encourage an atmosphere of frankness which will help in achieving better results.

7. Management by Exception Possible:

Management by exception means that management should not be involved in each and every activity. If the things are going well then there should be nothing to worry and management should intervene only when things are not going as per planning. Planning fixes objectives of the organization and all efforts should be made to achieve these objectives. Management should interfere only when things are not going well. By the introduction of management by exception, managers are given more time for planning the activities rather than wasting their time in directing day-to-day work.

8. Facilitates Control:

Planning and control are inseparable. Planning helps in setting objectives and laying down performance standards. This will enable the management to cheek performance of subordinates. The deviations in performance can be rectified at the earliest by taking remedial measures.

9. Facilitates Delegation:

Under planning process, delegation of powers is facilitated. The goals of different persons are fixed. They will be requiring requisite authority for getting the things clone. Delegation of authority is facilitated through planning process.

Limitations of Planning:

Despite of many advantages of planning, there may be some obstacles and limitations in this process. Planning is not a panacea for all the ills of the business. Planning will only help in minimizing uncertainties to a certain extent.

The following are some of the limitations of planning:

1. Lack of Reliable Data:

Planning is based on various facts and figures supplied to the planners. If the data on which decisions are based are not reliable then decisions based on such information will also be unreliable. Planning will lose its value if reliable facts and figures are not supplied.

2. Time Consuming Process:

Practical utility of planning is sometimes reduced by the time factor. Planning is a time- consuming process and actions on various operations may be delayed because proper planning has not yet been done. The delay may result in loss of opportunities. When time is of essence then advance planning loses its utility. Under certain circumstances an urgent action is needed then one cannot wait for the planning process to complete.

3. Expensive:

The planning process is very expensive. The gathering of information and testing of various courses of action involve greater amounts of money. Sometimes, expenses are so prohibitive that small concerns cannot afford to use planning. The long-term planning is a luxury for most of the concerns because of heavy expenses. The utility derived from planning in no case should be less than expenditure incurred on it.

According to Hainman, “The cost of planning should not be in excess of its contribution, and wise managerial judgment is necessary to balance the expense of preparing the plans against the benefits derived from them.”

4. External Factors may Reduce Utility:

Besides internal factors there are external factors too which adversely affect planning. These factors may be economic, social, political, technological or legal. The general national and international climate also acts as limitation on the planning process.

5. Sudden Emergencies:

In case certain emergencies arise then the need of the hour is quick action and not advance planning. These situations may not be anticipated. In case emergencies are anticipated or they have regularity in occurrence then advance planning should be undertaken for emergencies too.

6. Resistance to Change:

Most of the persons, generally, do not like any change. Their passive outlook to new ideas becomes a limitation to planning. McFarland writes. “The principal psychological barrier is that executives, like most people have more regard for the present than for the future. The present is not only more certain than the future, it is also more desirable. Resistance to change is commonly experienced phenomenon in the business world. Planning often implies changes which the executive would like to ignore, hoping they would not materialize.” The notion that things planned for future are unlikely to happen is not based on logical thinking. It is the planning which helps in minimizing future uncertainties.