Planning can be defined as a process of setting up of goals and objectives for a given period of time, formulating alternatives for the course of action to be taken, and finally deciding an appropriate action from the various alternatives. As a function of management, planning plays an important role in large business enterprises. The importance of planning are:
(i) Renders direction: Planning clearly states the goals and objectives to be achieved. Thus, it acts as a guide for various actions in the organisation. In other words, it renders direction to the tasks and activities of different departments of the organisation. It guides the managers how the particular task is to be performed, what route is to be taken and how the objectives are to be achieved. In this way; it ensures that the path taken for the accomplishment of goals is righteously chosen and various departments of the organisation work in a coordinated manner towards the achievement of the desired objectives.
(ii) Subdues risk: Planning helps to look into the future and accredits managers to analyze and anticipate various changes well in advance. This leads to a reduction in uncertainty of foreseen events. However, it should be remembered that although planning shows how to deal with various situations that may arise in the due course of management, it does not eliminate the problems.
(iii) Minimises overlapping: As the managers are well comprehended with the policies and plans of the organisation, they can work towards coordinating their activities in a better manner so as to achieve the objectives. In this way, planning helps in reducing the overlapping and duplication of work. Moreover, any wastage of resources that takes place due to repetition is also reduced. Proper planning ensures that the work proceeds smoothily without any confusion and misunderstanding.
(iv) Helps in decision making: Planning help in decision making. It involves analysing the future, evaluating the various courses of action and choosing the best alternative as per the goals and objectives. Thus, following a proper planning process helps the managers in taking rational decisions towards the benefit of the organisation as a whole so that revenue can increase.