The importance of planning as the major constituent in the management process is universally accepted. Planning not only brings stability and certainty to business, it also brings in a unified sense of direction and purpose for the achievement of certain well- defined objectives.
The basic reasons supporting systematic planning by managers are:
Sense of Direction – Planning provides a unity of purpose. It brings together all resources towards achieving common goals. Without plans and goals, organizations will respond to everyday events in an ad-hoc manner without considering long- term possibilities.
Resource Paucity – Resource crunch is a major challenge for organizations today.
Managements are confronted with the task of optimizing outputs with limited human, material, and financial resources through intelligent planning; otherwise, wasteful inefficiencies would lead to higher prices and severe shortages.
Uncertainty – Uncertainty is a major challenge even to the most intelligent planner. Organizations continually face micro and macro-economic uncertainty in the course of accomplishing their tasks. Planning helps managers anticipate such changes and meet these challenges.
Besides the above, there are several practical reasons for formulating plans.
– To focus organizational activity on a set of consciously created objectives.
– To provide a systematic guide for future activities.
– To increase organizational outcome through efficient operation.
– To encourage systematic thinking. Planning facilitates effective delegation of authority, removes communication gaps, and thereby raises overall efficiency.