Importance of Planning

The importance of the planning function should have be clear to you.  We can outline the importance of planning function as follows:

Provides Direction: Planning provides a clear sense of direction to the activities of the organization and to the job behavior of managers and others.  It strengthens their confidence in understanding where the organization is heading and what for,  how best to make the organization move along the chosen path, and when should they take what measures to achieve the goals of the organization.

Provides opportunity to analyze alternative courses of action:  Another source of importance of planning is that it permits managers to examine and analyze alternative course of action with a better understanding of their likely consequences.  If managers have an enhanced awareness of the possible future effects of alternative courses of action, for making a decision or for taking any action, they will be able to exercise judgment and proceed cautiously to choose the most feasible and favorable course of action.

Reduces uncertainties: Planning forces managers to shake off their inertia and insular outlook; it induces them to look beyond those noses, beyond today and tomorrow, and beyond immediate concerns.  It encourages them to probe and cut through complexities and uncertainties of the environment and to gain control over the elements of change.

Minimizes impulsive and arbitrary decisions: Planning tends to minimize the incidence of impulsive and arbitrary decisions and ad hoc actions; it obviates exclusive dependence on the mercies of luck and chance elements; it reduces the probability of major errors and failures in managerial actions.  It injects a measure of discipline in managerial thinking and organizational action.  It improves the capability of the organization to assume calculated risks.  It increases the freedom and flexibility of managers withing well-defined limits.

King-pin  function: As stated earlier, planning is a prime managerial function which provides the basis for the other managerial functions.  The organizational structure of task and authority roles is built around organizational plans.  The functions of motivation, supervision, leadership and communication are addressed to implementation of plans and achievement of organizational objectives.  Managerial control is meaningless without managerial planning.  Thus, planning is the king-pin function around which other functions are designed.

Resource Allocation: Planning is means of judicious allocation of strategic and scarce resources of the organization in the best possible manner for achieving strategic goals of the organization.  The strategic resources include funds, highly competent executives, technological talent, good contacts with government, exclusive dealer network and so on.  If the organization enjoys a distinct advantage in possession of such resources, a careful planning is essential to allocate them into those lines which would strengthen the overall competitive position of the organization.

Resource use efficiency:  For an ongoing organization, planning contributes towards a more efficient functioning of the various work units.  There is better utilization of the organization's existing assets, resources and capabilities.  It prompts managers to close gaps, to plug loopholes, to rectify deficiencies, to reduce wastage and leakages of funds, materials, human efforts and skills so as to bring about an overall improvement in resource use efficiency.

Adaptive responses:  Planning tends to improve the ability of the organization to effectively adapt and adjust its activities and directions in response to the changes taking place in the external environment.  An adaptive behavior on the part of the organization is essential for its survival as an independent entity.  For a business organization, for example, adaptive behavior is critical in technology, markets, products and so on.

Anticipative action: While adaptation is a behavior in reaction and response to some changes in the outside world, it is not enough in some situations.  In recognition of this fact, planning stimulates management to act, to take hold initiatives, to anticipate crises and threats and to ward them off, to perceive and seize opportunities ahead of other competitions, and to gain a competitive lead over others.  For the purpose, some enterprises establish environmental scanning mechanism as part of their planning systems.  Thereby such enterprises are able to direct and control change, instead of being directed and controlled by the pervasive external forces of change.

Integration: Planning is an important process to bring about effective integration of the diverse decisions and activities of the managers not only at a point of time but also over a period of time.  It is by reference to the framework provided by planning that managers make major decisions on organizational activities, in an internally consistent manner.