Planning is an all-pervasive and a primary function of management. No manager, irrespective of his position in the organization, can do without it. However, planning is subject to certain limitations and a proper understanding of them will go a long way in improving the efficiency of planning.
(i) Planning Premises may not be Fully Reliable: Planning premises provide the basis and framework for predictions. Since the future cannot be predicted with absolute accuracy, premising is always subject to a margin of error and guess-work which are reflected in various plans based on them. The difficulty of accurately premising them becomes the first planning limitation.
(ii) Rapidity of Change Sets Another Limit to Planning: Business enterprises operate in a changing environment, though the extent and impact of such changes may differ from industry to industry, and among the firms in the same industry. Planning is a relatively simple and easy task for a concern operating under stable conditions. Most of the public utilities enjoy such an advantage. On the other hand, industries and units working under dynamic conditions and confronting rapid changes face new problems and complications on account of instability. It makes their planning job extremely difficult.
(iii) Availability of Time and Cost Involved in Planning also Lay Down Limits to Planning: During a crisis or any other emergency, decisions have to be made without planning in advance whether the manager is ready for it or not. Such decisions are taken in the event of non-availability of time for detailed analysis and research. Besides, planning is not without cost. Greater the details in planning more will be the cost. Similarly, the cost of planning will go up if plans are drawn for longer periods. While finalizing details of the analysis the manager should remember that the benefits expected to be derived from planning should be more than the cost involved. But the application of this rule is by no means an easy task. It is so because ascertaining the benefits and cost of planning is a difficult exercise.
(iv) Philosophy of Management and Personnel can be a very Serious Limitation of Planning: Old concepts, beliefs, and traditions are often so deeply embedded in the minds of employees that plans which are not consistent with their philosophy may be extremely difficult to implement. Thus, where management is traditionally committed to high quality and high costs, it may not be inclined to carry out a plan to produce cheaper goods even though justified by results expected. Psychologically, people are resistant to change, and as such new ideas have to be sold well and people have to be convinced of the value of the change.
(v) Procedural and Policy Rigidities also Come in the Way of Planning: Procedures, rules, and policies once established are difficult to change. Planning, on the other hand, may call for a change in the existing procedures and policies. Where such internal inflexibilities dominate the enterprise, management tends to become bureaucratic and rule-centered. In such cases employees lose much of their initiative and bringing about an effective change through planning becomes a challenging job.
(vi) Capital Invested in the Firm is a very Powerful Internal Constraint on Planning: Changes in the environment may require overlooking consideration of capital already sunk in the business in the form of say, capital equipment or employee training. Managers, on the other hand, develop a strong tendency to feel so much committed to the recovery of capital sunk as a result of some earlier decision that future planning is constrained and limited to its recovery, and very often capital so invested itself becomes a planning premise.
(vii) External Constraints also Set Limits to Planning: There are those external limitations of planning over which management has very little or no control at all. Personnel policies and decisions might be limited by considerations of labor union pressures particularly when the union is organized on a national basis, and also by directives, rules, and legal provisions laid down by the Government from time to time. Similarly, Government policies, tax laws, competition, and technological changes, etc. act as a deterrent in the way of planning in varying degrees for different problems at different times.