Professional Documents
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Unit Two Planning Process & Types of Plan Definition of Planning
Unit Two Planning Process & Types of Plan Definition of Planning
its own strengths and weaknesses it can deal with the changing environment in a more
intelligent way.
4. Policies. Policies are general guidelines or constraints that aid in managerial thinking
and action. In a typical organization, there are production policies financial policies,
accounting policies, marketing policies, personnel policies, etc. These policies are more
specific than philosophy and from a basis for planning and necessary operational actions.
5. Plans: plans represent specific objective and action statements.
6. Priorities: A particular organizational goal must be given a particular priority .limited
resource of time, finance, materials etc.
Planning process
STAGES IN PLANNING
Planning is an intellectual process which the managers carry out for the efficient
management of the organization. The nature of this exercise will differ from one
organization to another and from one managerial level to another. However, the general
stages to be followed in laying down the organizational plans are described below:
1. Establishment of Objectives
The first step in planning is the determination of objectives. Objectives provide direction
to various activities in the enterprise. Planning has no utility if it is not related to certain
objectives. The establishment of objectives can, at times, be more important than the
objectives themselves since their establishment emphasizes how various people and units
fit into the overall organization framework. This process can also be used to motivate
individuals to achieve objectives which they have helped to establish. Objectives clarify
the tasks to be accomplished. Overall objectives define what is to be accomplished in
general terms. The derivative objectives focus on more details; that is, what is to be
accomplished, where action is to take place, who is to perform it, how it is to be
undertaken, and when it is to be accomplished.
2. Assessment of Environment
Sufficient information must be collected in order to make the plans and sub plans.
Necessary information includes the critical assessment of the current status of the
organization together with a forward look at the environment that is anticipated. The
collection and forecasting of information should be done in terms of external and internal
environment. The assessment of external environment should include consideration of
competition now and in the future, government policies, social values, political
conditions, international situation and other externalities that may affect the organization
in the future. The assessment of internal environment may consider the strong and weak
points of the organization.
Types of plans
Plans can be classified as (1) purposes or missions, (2) objectives or goals, (3) strategies,
(4) policies, (5) procedures, (6) rules, (7) programs, and (8) budgets.
1. Purposes or Missions
The mission, or purpose (the terms are often used interchangeably), identifies the basic
function or task of an enterprise or agency or any part of it. Every kind of organized
operation has, or at least should have if it is to be meaningful, a purpose or a mission. In
every social system, enterprises have a basic function or task assigned to them by society.
For example, the purpose of a business generally is the production and distribution of
goods and services. The purpose of a state highway department is the design, building,
and operation of a system of state highways. The purpose of the courts is the
interpretation of laws and their application. The purpose of a university is teaching,
research, and providing services to the community. Although we do not do so, some
writers distinguish between purposes and missions. While a business, for example, may
have a social purpose of producing and distributing goods and services, it can accomplish
this by fulfilling a mission of producing certain lines of products. The missions of an oil
company, like Exxon, are to search for oil and to produce, refine, and market petroleum
and many petroleum products, from diesel fuel to chemicals. The mission of the Du Pont
Company has been expressed as "better things through chemistry," and Kimberly-Clark
(noted for its Kleenex trademark) regards its business mission as the production and sale
of paper and paper products. In the 1960s, the mission of NASA was to get a person to
the moon before the Russians. Hallmark, which has expanded its business beyond
greeting cards, defines its mission as "the social expression business." It is true that in
some businesses and other enterprises, the purpose or mission often becomes fuzzy. For
example, many conglomerates have regarded their mission as synergy,* which is
accomplished through the combination of a variety of companies.
2. Objectives or Goals
Objectives, or goals, (the terms are used interchangeably in this book), are the ends
toward which activity is aimed. They represent not only the end point of planning but
also the end toward which organizing, staffing, leading, and controlling are aimed.
3. Strategies
For years the military used the word "strategies" to mean grand plans made-light of what
it was believed an adversary might or might not do. While the term "strategy" still usually
has a competitive implication, managers increasingly use it to reflect broad areas of an
enterprise operation. In this book, strategy is defined as the determination of the basic
long-term objectives of an enterprise and the adoption of courses of action and allocation
of resources necessary to achieve these goals.
4. Policies
Policies also are plans in that they are general statements or understandings that guide or
channel thinking in decision making. Policies define an area within which a decision is to
be made and ensure that the decision will be consistent with, and contribute to, an
objective. Policies help decide Issues before they become problems, make it unnecessary
to analyze the same situation every time it comes up, and unify other plans, thus
permitting managers to delegate authority and still maintain control over what their
subordinates do
5. Procedures
Procedures are plans that establish a required metl10d of handling future activities. They
are chronological sequences of required actions. They are guides to action, ratl1er than to
thinking, and they detail the exact manner in which certain activities must be
accomplished. Procedures often cut across department lines.
For example, in a manufacturing company, the procedure for handling orders will almost
certainly involve the sales department (for the original order), tl1e finance department
(for acknowledgment of receipt of funds and for customer credit approval), the
accounting department (for recording the transaction), and production department (for the
order to. produce goods or authority to release them from stock), and traffic department
(for determination of shipping means and route).
A few examples illustrate the relationship between procedures and policies. The company
policy may grant employees vacations; procedures established to implement this policy
will provide for scheduling vacations to avoid disruption of work, setting methods and
rates of vacation pay, maintaining records to assure each employee of a vacation, and
spelling out the means for applying for a vacation.
6. Rules
Rules spell out specific required actions or nonactions allowing no discretion. They are
usually the simplest type of plan. "No smoking" is a rule that allows no deviation from a
stated course of action. The essence of a rule is that is reflects a managerial decision that
some certain action must-or must not-be taken. Be sure you can distinguish rules from
policies. The purpose of policies is to guide decision making by marking off areas in
which managers can use their discretion. Rules allow no discretion in their application.
7. Programs
Programs are a complex of goals, policies, procedures, rules, task assignments, steps to
be taken, resources to be employed, and other elements necessary to carry out a given
course of action; they are ordinarily supported by budgets. They may be as major as an
airline's program to acquire a $400 million fleet of jets or the 5-year program to improve
the status and quality of its thousands of supervisors, or they may be as minor as a
program formulated by a single supervisor to improve the morale of workers in the partsmanufacturing department of a farm machinery company.
8. Budget
A budget is a statement of expected results expressed in numerical terms. It may be called
a "numberized" program. In fact, the financial operating budget is often called a profit
plan. Budget may be expressed in term financial terms of labor-hours unit of product, or
machine hours etc.
LIMITATIONS OF .PLANNING
The limitations of planning are as under:
1. Lack of Accurate Information. The reliability of a plan depends upon facts and
information on which it is based. If reliable information and dependable data are not
available, planning is sure to lose much of its relevance.
2. Lack of Accurate Forecasts. Planning concerns future activity and its quality will be
determined by the quality of forecast of future events. As no manager can predict
completely and accurately the events of future, the plans may pose problems in operation.
This problem is further increased by problems in formulating accurate premises. Many
times, managers may not be aware about the various conditions within which they have
to formulate their plans.
3. Complex Process. Planning is a complex and expensive process. It demands serious
thinking, tremendous hard work and time. Some managers do not like to undergo such a
complicated process as they prefer short-cuts. Such planning may not yield the desired
results.
4. Rigidities. Planning may result in internal inflexibilities and procedural rigidities. By
limiting individual freedom, planning may stifle initiative and personal development.
Rigidities appear from managers' negligence to revise the plan, particularly policies and
procedures.
.
5. Lack of Specific Goals. Qualitative objectives like social responsibility, management
development, quality of work life, etc. are often expressed in vague generalizations which
defy proper evaluation. Once these objectives conflict with quantifiable ones, managers
tend to ignore them totally. Planning cannot be effective unless goals are specific, clear
and actionable.
6. Lack of Planning Skills. A plan can be no better than the competence of the planner
who does the planning. Planning is an art and takes a special type of person to plan. Not
every one is capable of planning and solving organizational problems. A planner must
possess not only skill, but also intelligence and breadth of vision, and, for long-range
planning, must have the ability to forecast.
7. Resistance to Change. Resistance to change is another factor, which puts limits on
planning. It is a commonly experienced phenomenon in the business world. Sometimes,
planners themselves do not like change and, on other occasions, they do not think it
desirable to bring change as it will create resistance on the part of the workers. This
attitude makes the planning process ineffective.
8. Lack of Participation. People who are not involved in the formulation of plans may
tend to resist the plans at their implementation stage. Plans imposed from above often
lead to resentment and resistance among those forced to implement them.
9. Psychological Factors. Psychological factors also limit the effectiveness of planning.
Some people consider present more important than future because present is certain. Such
persons are psychologically opposed to planning. But it should not be forgotten that
dynamic managers always look ahead. LpJ)g-range well-being of the enterprise cannot be
achieve~ unless proper planning is done.
10. External Factors. The planners are often confronted with external forces.
ADVANTAGES OF PLANNING
The following advantages can be achieved by an efficient system of planning:
(I) Reduction of Uncertainty. Future is always full of uncertainties. A business
organization has to function in these uncertainties. It can operate successfully if it is able
to predict the uncertainties. Some of the uncertainties can be predicted by undertaking
systematic forecasting. Thus, planning helps in foreseeing uncertainties which may be
caused by changes in technology, fashion. and taste of people, Government rules and
regulations, etc.
(II) Concentration on Objectives. It is a basic characteristic of planning that it is related
to the organizational objectives. All the operations are planned to achieve the
organizational objectives. Planning facilitates the achievement of objectives by focusing
attention on them. It requires the clear definition of objectives so that the most
appropriate alternative courses of action are chosen.
(III) Coordination. Good plans unify the inter-departmental activity and clearly lay
down the area of freedom in the development of various sub-plans. Various departments
work in accordance with the overall plans of the organization. Thus, there is harmony in
the organization, and duplication of efforts and conflict of jurisdiction are avoided.
MBO
Neither the term management nor the term objectives is new. What is new about these
terms is a distinct philosophy of management built around these terms; and popularized
as management by objectives (or MBO). The credit for developing this philosophy of
MBO could be bestowed upon Peter F. Drucker' However, some authorities object to it;
as according to them, nobody could be the originator of a philosophy of management
which utilizes terms like management and objectives'. In fact, formation of groups for
attainment of objectives through the agency of management is an ages old phenomenon.
MBO might be defined as follows:
MBO is a distinct philosophy of managing any business enterprise in which (under a
short-term management-programme) objectives for subordinates are worked out through
a process of mutual consultation between subordinates and concerned superiors, in
verifiable terms; and such objectives subsequently becoming standards of control for
measuring performance of individuals against these.
MBO Process
Corporate
Objectives
Counseling of
subordinates
Departmental
Objectives
Performance
review
Target for
individual
subordinates
Establishment
of checkpoints
Advantages of MBO
(I) Overall improvement in organizational performance provided, a scheme of MBO
is appropriately designed in a 'tailor-made' system; it is likely to lead to an overall
improvement in the organizational performance.
(II) Specific Planning Because of numerical expression of objectives under MBO,
planning becomes more specific Subordinates better appreciate as to what exactly is
expected of them.
(III) Elicits commitment perhaps the biggest advance of MBO is that it is a great
motivational device. It elicits commitment to objectives on the part of subordinates; as
subordinates feel achieving those targets which they have determined for themselves.
(IV) Better controlling MBO leads to better controlling in two senses
(a) Controlling is immediate; as standards of controlling are the objectives themselves.
(b) There is least or no resistance to controlling; because objectives (i.e. standards of
controlling) are determined by subordinates themselves in consultation with superiors.
Limitations of MBO
(I) Failure of teach philosophy of MBO
It is rather different for management to teach the philosophy of MBO to rank and file
organization; because of the technical processes involved in making a scheme of MBO.
One must expect success of a scheme; basics of which are not fully comprehended by
people.
(II) Tug-.of-war phenomenon
Setting of objectives under MBO creates a sort of 'tug-of-war' situation among superiors
and subordinates. Subordinates prefer objectives to be set on a lower side; superiors
would like mO~1 work to be assigned to subordinates. In fact, the dominating partywhether the superior or the subordinate-will have a major impact on the determination of
objectives. As such, realistic goal setting under MBO may be a rarity.
(III) Over-emphasis on short-run goals
Under MBO, there is an over emphasis on short-run goals to the exclusion of long-run
goal which might be critical for the survival and growth of the enterprise.
(IV) Over-quantification of management
Because of the need to quantify objectives under MBO, qualitative aspects of managing
may completely overlooked.
(v) Wastage of time
MBO involves wastage of a lot of valuable time of managers in joint consultations; and
they left with little time for efficiently discharging their jobs.