UNIT -2 Planning

DR.DARSHANA VITHALANI, ASSISTANT PROFESSOR, MBA,

MARWADI UNIVERSITY, RAJKOT
Define the nature and purposes of planning.
Classify the types of goals organizations
might have and the plans they use.
Compare and contrast approaches to goal-
setting and planning.
Discuss contemporary issues in planning.

Copyright
Copyright © 2014 © Education,
Pearson 2012 PearsonInc.Education,
publishingInc.
as Prentice Hall 8-2
Publishing as Prentice Hall
• Planning - defining the organization’s
goals, establishing strategies for achieving
those goals, and developing plans to
integrate and coordinate work activities.
What
• Formal planning Is Planning?
– Specific goals covering a specific time period
– These goals are: Written and shared with
organizational members.
– Specific plans exist for achieving these goals.
• Four reasons for planning
– Provides direction
– Reduces uncertainty
– Minimizes waste and redundancy
Why Do Managers Plan?
– Sets the standards for controlling
 Planning and Performance

• Formal planning is associated with:

– Positive financial results - higher profits,
higher return on assets, and so forth
– The quality of planning and implementation
affects performance more than the extent of
planning
– The external environment can reduce the
impact of planning on performance
– The planning-performance relationship seems
to be influenced by the planning time frame
 Types of Plans

The most popular ways to describe organizational plans

are breadth (strategic versus operational), time frame
(short term versus long term), specificity (directional
versus specific), and frequency of use (single use
versus standing).
 Exhibit 7-1
Types of Plans
Planning from Top to Bottom
Vision
Mission
Tactical Plans, MBO
Standing Plans
Operational Plans
Vision
Single-Use Plans
Top
Managers
Mission

Tactical Plans, MBO

Middle

First-Level Operational, Standing, Single-Use

Managers
3 8
 Starting at the Top

Clarify how the company will

Strategic Plans serve customers and position
itself against competitors (2-5 years)

An inspirational statement of an
Vision organization’s purpose
(2 sentences)

Overall goal that unifies efforts toward

its vision, stretches and challenges,
Mission
and possesses a finish line and
3.1 time frame. Flows from vision.
9
 Bending in the Middle

Specify how a company will use

resources, budgets, and people to
Tactical Plans
accomplish goals within its mission.
(6 months to 2 years)

Management
by Develop and carry out tactical plans
Objectives

MBO is a four-step process

3.2 10
 Finishing at the Bottom

Day-to-day plans for producing or

Operational
delivering products and services over
Plans
a 30-day to six-month period

3.3 11
 Kinds of Operational Plans

Plans that cover unique,

Single-Use Plans
one-time-only events

Plans used repeatedly to handle

frequently recurring events.
Standing Plans
Three kinds are: policies, procedures,
and rules and regulations.

Quantitative planning to decide how

Budgets to allocate money to accomplish
company goals
3.3 12
 Types of Plans

• Strategic plans - plans that apply to the

entire organization and establish the
organization’s overall goals
• Operational plans - plans that
encompass a particular operational area of
the organization
• Long-term plans - plans with a time frame
beyond three years
• Short-term plans - plans covering one year or
less
• Specific plans – plans that are clearly defined
and leave no room for interpretation
• Directional plans - plans that are flexible and
set out general guidelines
• Single-use plan - a one-time plan
specifically designed to meet the needs of
a unique situation
• Standing plans ongoing plans that
provide guidance for activities performed
repeatedly
 Benefits of Planning

Benefits
of Planning

Persistence Direction

Creation
Intensified
of Task
Effort
Strategies
1.1
18
 Pitfalls of Planning

Pitfalls
of Planning

False Sense
of Certainty

Impedes Change Detachment

and Adaptation of Planners

1.2
19
1) Identification of problems & awareness of opportunities:-
The manager must identify the problems while planning so that
suitable action can be taken. This will help to take further steps
for completing the objectives. Planning starts with analysis &
external environment. This is essential for businessmen to be
aware of opportunities in the market. They must consider
changes in consumer demand, number of competitors, change
in habits, change in technology etc. At the same time the
businessmen has to conduct internal
2) Establishing Objectives: -
The entire planning activity is directed towards achieving the
objectives of the enterprise. Determining objectives is a real
starting point of planning process. Once the objectives are fixed
it is necessary to finalize objectives for various department.
3) Establishing Planning Premises: - Premises may be internal or external; it may be
controllable & uncontrollable. Normally, internal premises are controllable & external are
uncontrollable. Internal premises include capital investment, availability of material,
labour & financial position. It includes the part of decision making & external premises
include economical, social, political & competitors. It also includes government policies.

4) Determining Alternative Courses: - In this step various possible course of action or

plans are developed to achieve a particular object.
5) Selecting Ideal Courses of Action: - After the careful
examination of various alternatives ideal course of action, the
most suitable course of action or plan is selected to achieve pre-
determine objective.
6) Formulation of Derivative Plans: - Once the overall plan is
selected it becomes essential to fix the detail sequence & timing
of the plan. Then subsidiary or derivative plan is to be
considered. Primary plan of action is decided by preparing
separate derivative plans for each section or division of the
enterprise.
7) Provision for Follow-up: - Planning is always followed by
action. Some modifications may be required for achieving pre-
determined objective & adequate follow up provides assurance
about fulfillment of objective.
Importance of Planning
 Efficient Use of Resources- All organizations, large and small, have
limited resources. The planning process provides the information
top management needs to make effective decisions about how to
allocate the resources in a way that will enable the organization to
reach its objectives.
 Productivity is maximized and resources are not wasted on projects
with little chance of success.

 Establishing Goals- Setting goals that challenge everyone in the organization to

strive for better performance is one of the key aspects of the planning process.
Goals must be aggressive, but realistic. Organizations cannot allow themselves
to become too satisfied with how they are currently doing--or they are likely to
lose ground to competitors. The goal setting process can be a wake-up call for
managers that have become complacent.
 The other benefit of goal setting comes when forecast results are compared to
actual results. Organizations analyze significant variances from forecast and
take action to remedy situations where revenues were lower than plan or
expenses higher.
 Managing risk is essential to
Managing Risk And Uncertainty-
an organization’s success. Even the largest corporations
cannot control the economic and competitive
environment around them. Unforeseen events occur that
must be dealt with quickly, before negative financial
consequences from these events become severe.
 Planning encourages the development of “what-if”
scenarios, where managers attempt to envision possible
risk factors and develop contingency plans to deal with
them. The pace of change in business is rapid, and
organizations must be able to rapidly adjust their
strategies to these changing conditions.
 Team Building- Planning promotes team building and a
spirit of cooperation. When the plan is completed and
communicated to members of the organization, everyone
knows what their responsibilities are, and how other
areas of the organization need their assistance and
expertise in order to complete assigned tasks.
 They see how their work contributes to the success of
the organization as a whole and can take pride in their
contributions. Potential conflict can be reduced when top
management solicits department or division managers’
input during the goal setting process. Individuals are less
likely to resent budgetary targets when they had a say in
their creation.
 Creating CompetitiveAdvantages- Planning
helps organizations get a realistic view of their
current strengths and weaknesses relative to
major competitors. The management team
sees areas where competitors may be
vulnerable and then crafts marketing strategies
to take advantage of these weaknesses.
 Observing competitors’ actions can also help
organizations identify opportunities they may
have overlooked, such as emerging
international markets or opportunities to
market products to completely different
customer groups.
 MANAGEMENT BY OBJECTIVES
(MBO) -

Management by objectives (MBO) -

a process of setting mutually agreed upon
goals and using those goals to evaluate
employee performance

MBO programs have four elements: goal specificity, participative

decision making, an explicit time period, and performance
feedback.
Instead of using goals to make sure employees are doing what
they’re supposed to be doing, MBO uses goals to motivate them
as well. The appeal is that it focuses on employees working to
accomplish goals they’ve had a hand in setting.
.
Steps in MBO
Five steps of MBO process
Five steps in MBO

1. Set or Review Organizational Objectives

MBO starts with clearly defined strategic organizational objectives
(see our article on Mission and Vision Statements for more on this.) If
the organization isn’t clear where it’s going, no one working there
will be either.

2. Cascading Objectives Down to Employees

To support the mission, the organization needs to set clear goals and
objectives, which then need to cascade down from one organizational
level to the next until they reach the everyone.
To make MBO goal and objective setting more effective, Drucker used
the SMART acronym to set goals that were attainable and to which
people felt accountable. He said that goals and objectives must be:
1. Specific 2. Measurable 3. Agreed (participative)
4. Realistic 5. Time related
3. Encourage Participation in Goal Setting
Through a participative process, every person in the
organization will set his or her own goals, which
support the overall objectives of the team, which
support the objectives of the department, which
support the objectives of the business unit, and
which support the objectives of the organization.
4. Monitor Progress
Because the goals and objectives are SMART, they are
measurable. This monitoring system has to be timely
enough so that issues can be dealt with before they
threaten goal achievement. Set up a specific plan for
monitoring goal performance.
5. Evaluate and Reward Performance
MBO is designed to improve performance at
all levels of the organization. To ensure this
happens, you need to put a comprehensive
evaluation system in place. Employees
should be given feedback on their own goals
as well as the organization’s goals. The
importance of fair and accurate assessment
of performance highlights why setting
measurable goals and clear performance
indicators are essential to the MBO system.
Define decision making

 Decision-making involves the selection of a course

of action from among two or more possible
alternatives in order to arrive at a solution for a given
problem”.
Nature and Importance Of Decision
Making
1. Better utilization of resources
2. Facing problems & challenges
3. Business growth
4. Achieving objectives
5. Increases efficiency
6. Facilitates innovation
7. Motivates employees
TYPE OF DECISION
Decision making process

 Identify the decision. The first step in making the

right decision is recognizing the problem or
opportunity and deciding to address it.
Determine why this decision will make a difference
to your customers or fellow employees.
 Gather information. Next, it’s time to gather
information so that you can make a decision based
on facts and data. This requires making a value
judgment, determining what information is relevant
to the decision at hand, along with how you can get
it. Ask yourself what you need to know in order to
make the right decision, then actively seek out
anyone who needs to be involved.
 Identify alternatives. Once you have a clear understanding
of the issue, it’s time to identify the various solutions at your
disposal. It’s likely that you have many different options
when it comes to making your decision, so it is important to
come up with a range of options. This helps you determine
which course of action is the best way to achieve your
objective.
 Weigh the evidence. In this step, you’ll need to “evaluate
for feasibility, acceptability and desirability” to know
which alternative is best, according to management experts
Phil Higson and Anthony Sturgess. Managers need to be
able to weigh pros and cons, then select the option that has
the highest chances of success. It may be helpful to seek
out a trusted second opinion to gain a new perspective on
the issue at hand.
 Choose among alternatives. When it’s time to
make your decision, be sure that you understand
the risks involved with your chosen route. You may
also choose a combination of alternatives now that
you fully grasp all relevant information and
potential risks.
 Take action. Next, you’ll need to create a plan for
implementation. This involves identifying what
resources are required and gaining support from
employees and stakeholders. Getting others
onboard with your decision is a key component of
executing your plan effectively, so be prepared to
address any questions or concerns that may arise.
 Review your decision. An often-overlooked
but important step in the decision making
process is evaluating your decision for
effectiveness. Ask yourself what you did well
and what can be improved next time.
 “Even the most experienced business owners
can learn from their mistakes … be ready to
adapt your plan as necessary, or to switch to
another potential solution,” Chron Small
Business explains. If you find your decision
didn’t work out the way you planned, you may
want to revisit some of the previous steps to
identify a better choice.