Business Laws and Management · Functions of Management

Planning as a Function of Management for CSEET

Updated 11 October 2026 · Fact-checked

Planning is deciding in advance what to do, how to do it, when to do it and who will do it. The process runs from setting objectives to following up. Types of plans are objectives, policies, strategies, procedures, rules and budgets. Learn the one-line difference between each for MCQs.

Understand Planning

Planning is the first function of management. It means thinking ahead and deciding a course of action before you act. It bridges the gap between where the organisation is now and where it wants to reach.

Planning has clear features. It is goal-oriented, because every plan aims at objectives. It is a primary function, because organising, staffing, directing and controlling depend on it. It is pervasive, because every manager at every level plans. It is continuous, because plans are revised as conditions change. It is forward-looking and involves choosing among alternatives, so it is also a decision-making exercise.

The plan types differ in scope and flexibility. Objectives are the end results to be achieved. Strategy is a broad plan for reaching objectives, usually made by top management, keeping in view competitors and the environment. Policy is a general guide for decision-making; it gives managers room for judgement. Procedure is the step-by-step sequence of tasks for a routine activity. Rule is a specific, rigid statement of what must or must not be done, with no discretion. Budget is a plan stated in numbers, such as expected income, expenditure or output, for a future period.

Planning also has limitations. It creates rigidity, may not work in a dynamic environment, costs time and money, gives no guarantee of success, and depends on forecasts that may be wrong. Plans based on past data can mislead when conditions change suddenly.

Key formulas to remember

Planning process (sequence): Set objectives → Develop premises → Identify alternatives → Evaluate alternatives → Select best alternative → Implement the plan → Follow up; Questions often ask which step comes before or after another. Premises are assumptions about the future and come right after objectives.
Policy vs Procedure vs Rule: Policy = guide to thinking | Procedure = sequence of steps | Rule = fixed do or don't; Policy allows discretion. Procedure fixes the order of actions. Rule allows no discretion and has no sequence.
Strategy vs Policy: Strategy = plan to meet competitors and reach objectives | Policy = guide for routine decisions; Strategy is made at top level and deals with the environment. Policy guides managers within the organisation.
Budget: Budget = plan expressed in numbers for a future period; It is both a plan and a control tool.

How to solve Planning questions

Use this method for any question on planning, whether it is an MCQ or a written answer.

1Read the question and note the keyword: meaning, feature, step, type or limitation.
2If it is about a type of plan, match the clue to a type: end result (objective), general guide (policy), sequence of steps (procedure), rigid do or don't (rule), numbers (budget), competitive broad plan (strategy).
3If it is about the process, place the step in order: objectives, premises, alternatives, evaluate, select, implement, follow up.
4For a feature or limitation, pick the one the statement describes, such as rigidity for a fixed plan or costliness for heavy planning effort.
5Eliminate options that describe a different function, such as controlling or organising.
6In a written answer, define the term, list points with one line of explanation each, and add a short example.

Quickest way: Keyword matching for plan types

When to use it: Use it in the OMR paper when an MCQ asks you to identify a type of plan or the order of steps.

Spot the signal word in the statement.
'Sequence', 'steps', 'chronological' means procedure.
'Guide', 'discretion', 'general' means policy.
'No deviation', 'must not', 'strictly' means rule.
'Figures', 'financial', 'numerical' means budget.
'Competitors', 'long-term direction' means strategy.
For the process, remember: objectives first, follow-up last, premises second.

Common mistakes in Planning

Treating policy and rule as the same thing.
Both guide behaviour and both are set in advance.
Fix: Ask if a manager can use judgement. If yes, it is a policy. If no, it is a rule.
Calling a rule a procedure because it has instructions.
Both tell people what to do.
Fix: A procedure has an order of steps. A rule is a single instruction with no sequence.
Placing premises after evaluating alternatives in the process.
Students memorise only the main steps and skip premises.
Fix: Remember that you need assumptions about the future before you can list and judge alternatives.
Saying planning guarantees success.
Students overstate the benefits of planning.
Fix: Planning reduces risk but does not remove it. It is a listed limitation that planning gives no guarantee.
Confusing strategy with objectives.
Both are top-level and long-term.
Fix: The objective is what you want to reach. The strategy is how you plan to reach it against competition.
Writing that planning is only for top management.
Strategy is linked with top level, so students generalise.
Fix: Planning is pervasive. Every manager plans at their own level.

Worked examples

Example 1

A company's HR manual says: 'Applications for leave must be submitted to the department head, who forwards them to HR, and HR then issues approval.' Identify the type of plan and justify.

Show the solution

The statement lists a series of actions in a fixed order: submit, forward, approve.
A plan that sets out the chronological sequence of steps for a routine task is a procedure.
It is not a rule, because a rule is a single fixed instruction without a sequence.
It is not a policy, because it does not give a general guide for discretion.

Answer: It is a procedure, because it prescribes the sequence of steps for handling leave applications.

Example 2

Which of the following correctly shows the planning process in order? (a) Set objectives, develop premises, identify alternatives, select alternative (b) Develop premises, set objectives, select alternative, identify alternatives (c) Identify alternatives, set objectives, select alternative, develop premises (d) Select alternative, set objectives, develop premises, identify alternatives

Show the solution

Planning begins with setting objectives, so options (b), (c) and (d) are ruled out because they start with a different step.
Option (a) follows with premises, then alternatives, then selection.
This matches the standard sequence: objectives, premises, alternatives, evaluation, selection, implementation, follow-up.

Answer: Option (a).

Exam tips

In the OMR paper, questions often give a scenario and ask you to name the type of plan. Practise the keyword method.
Learn the process steps as a chain and be ready for 'which step comes next' questions.
Differences between policy, procedure and rule are a favourite. Prepare one line for each pair.
For written answers on limitations, give each point with a short example, such as a rigid plan failing when demand suddenly changes.
There is no negative marking in Paper 4, so attempt every question.

Practice questions from Functions of Management

Planning in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Planning: frequently asked questions

What are the steps in the planning process?

The steps are setting objectives, developing premises, identifying alternatives, evaluating them, selecting the best one, implementing the plan and following up. Each step depends on the previous one. Follow-up checks whether the plan is working.

What is the difference between policy and procedure?

A policy is a general guide for decisions and leaves room for judgement. A procedure is a fixed sequence of steps for doing a routine task. A policy tells you how to think, while a procedure tells you what to do in order.

What are the limitations of planning?

Planning can make an organisation rigid and may not work well in a changing environment. It takes time and money and depends on forecasts that may be wrong. It also does not guarantee success.

Is a budget a type of plan?

Yes. A budget states the plan in numbers for a future period, such as expected sales or expenses. It also helps in control by comparing actual results with the plan.