Merits and Demerits of Planning

 Merits

1. Planning facilitates management by objectives.

   1. Planning begins with determination of objectives.
   2. It highlights the purposes for which various activities are to be undertaken.
   3. In fact, it makes objectives more clear and specific.
   4. Planning helps in focusing the attention of employees on the objectives or goals of enterprise.
   5. Without planning an organization has no guide.
   6. Planning compels manager to prepare a Blue-print of the courses of action to be followed for accomplishment of objectives.
   7. Therefore, planning brings order and rationality into the organization.

2. Planning minimizes uncertainties.

   1. Business is full of uncertainties.
   2. There are risks of various types due to uncertainties.
   3. Planning helps in reducing uncertainties of future as it involves anticipation of future events.
   4. Although future cannot be predicted with cent percent accuracy but planning helps management to anticipate future and prepare for risks by necessary provisions to meet unexpected turn of events.
   5. Therefore with the help of planning, uncertainties can be forecasted which helps in preparing standbys as a result, uncertainties are minimized to a great extent.

3. Planning facilitates co-ordination.

   1. Planning revolves around organizational goals.
   2. All activities are directed towards common goals.
   3. There is an integrated effort throughout the enterprise in various departments and groups.
   4. It avoids duplication of efforts. In other words, it leads to better co-ordination.
   5. It helps in finding out problems of work performance and aims at rectifying the same.

4. Planning improves employee’s moral.

   1. Planning creates an atmosphere of order and discipline in organization.
   2. Employees know in advance what is expected of them and therefore conformity can be achieved easily.
   3. This encourages employees to show their best and also earn reward for the same.
   4. Planning creates a healthy attitude towards work environment which helps in boosting employees moral and efficiency.

5. Planning helps in achieving economies.

   1. Effective planning secures economy since it leads to orderly allocation ofresources to various operations.
   2. It also facilitates optimum utilization of resources which brings economy in operations.
   3. It also avoids wastage of resources by selecting most appropriate use that will contribute to the objective of enterprise. For example, raw materials can be purchased in bulk and transportation cost can be minimized. At the same time it ensures regular supply for the production department, that is, overall efficiency.

6. Planning facilitates controlling.

   1. Planning facilitates existence of certain planned goals and standard of performance.
   2. It provides basis of controlling.
   3. We cannot think of an effective system of controlling without existence of well thought out plans.
   4. Planning provides pre-determined goals against which actual performance is compared.
   5. In fact, planning and controlling are the two sides of a same coin. If planning is root, controlling is the fruit.

7. Planning provides competitive edge.

   1. Planning provides competitive edge to the enterprise over the others which do not have effective planning. This is because of the fact that planning may involve changing in work methods, quality, quantity designs, extension of work, redefining of goals, etc.
   2. With the help of forecasting not only the enterprise secures its future but at the same time it is able to estimate the future motives of it’s competitor which helps in facing future challenges.
   3. Therefore, planning leads to best utilization of possible resources, improves quality of production and thus the competitive strength of the enterprise is improved.

8. Planning encourages innovations.

   1. In the process of planning, managers have the opportunities of suggesting ways and means of improving performance.
   2. Planning is basically a decision making function which involves creative thinking and imagination that ultimately leads to innovation of methods and operations for growth and prosperity of the enterprise.

 Demerits

Internal Limitations

There are several limitations of planning. Some of them are inherit in the process of planning like rigidity and other arise due to shortcoming of the techniques of planning and in the planners themselves.

1. Rigidity

   1. Planning has tendency to make administration inflexible.
   2. Planning implies prior determination of policies, procedures and programmes and a strict adherence to them in all circumstances.
   3. There is no scope for individual freedom.
   4. The development of employees is highly doubted because of which management might have faced lot of difficulties in future.
   5. Planning therefore introduces inelasticity and discourages individual initiative and experimentation.

2. Misdirected Planning

   1. Planning may be used to serve individual interests rather than the interest of the enterprise.
   2. Attempts can be made to influence setting of objectives, formulation of plans and programmes to suit ones own requirement rather than that of whole organization.
   3. Machinery of planning can never be freed of bias. Every planner has his own likes, dislikes, preferences, attitudes and interests which is reflected in planning.

3. Time consuming

   1. Planning is a time consuming process because it involves collection of information, it’s analysis and interpretation thereof. This entire process takes a lot of time specially where there are a number of alternatives available.
   2. Therefore planning is not suitable during emergency or crisis when quick decisions are required.

4. Probability in planning

   1. Planning is based on forecasts which are mere estimates about future.
   2. These estimates may prove to be inexact due to the uncertainty of future.
   3. Any change in the anticipated situation may render plans ineffective.
   4. Plans do not always reflect real situations inspite of the sophisticated techniques of forecasting because future is unpredictable.
   5. Thus, excessive reliance on plans may prove to be fatal.

5. False sense of security

   1. Elaborate planning may create a false sense of security to the effect that everything is taken for granted.
   2. Managers assume that as long as they work as per plans, it is satisfactory.
   3. Therefore they fail to take up timely actions and an opportunity is lost.
   4. Employees are more concerned about fulfillment of plan performance rather than any kind of change.

6. Expensive

   1. Collection, analysis and evaluation of different information, facts and alternatives involves a lot of expense in terms of time, effort and money
   2. According to Koontz and O’Donell, ’ Expenses on planning should never exceed the estimated benefits from planning. ’

External Limitations of Planning

1. Political Climate- Change of government from Congress to some other political party, etc.
2. Labour Union- Strikes, lockouts, agitations.
3. Technological changes- Modern techniques and equipments, computerization.
4. Policies of competitors- Eg. Policies of Coca Cola and Pepsi.
5. Natural Calamities- Earthquakes and floods.
6. Changes in demand and prices- Change in fashion, change in tastes, change in income level, demand falls, price falls, etc.