Chapter 3: PLANNING 9.
Review your statements with others to assure
What is Planning?
-Is a logical and systematic approach of formulating
the objectives, programs, policies, procedures,
budgets, rules and regulations, and other types of
plans.
- Considered the most basic of all managerial
functions. Without this, other functions of a manager
cannot be tackled efficiently and effectively.
-- Managers organizes, staffs, directs, and controls in
order to guarantee the attainment of objectives and
the other types of plans
Nature of Planning – 4 Major Factors
1. Contribution to Purpose and Objectives – planning is
required to facilitate accomplishment of business purpose
and objectives. This statement is taken from the nature of
organized business.
2. Planning as the First Basic Function – logically
performed before the execution of all other managerial
functions. All managerial functions must be planned if they
are to be effective and efficient.
3. Planning as a Function of All Managers – the
character and scope of planning will differ from one
authority to another.
4. Planning for Efficient Organization – evaluated by the
amount it contributes to purpose and objectives as offset
Major Types of Plans
Objectives or Goals
-Goal prescribes definite scope and suggests direction to
maximize the efforts of a manager. Synonymous to aim,
purpose.
-Objectives have to do with the direction in which an
individual or organization wants to move. Planning involved
determination of desired future events. These results or
events are objective and go by the name of
targets.
Mission
-It is the purpose or reason for the existence of an
organization. Can be defined in terms of an organization’s
products/service or
markets/customers.
Long-Range and Short-Range Objectives
-Long-range generally go beyond the current fiscal or
calendar year of the organization. Ex. Increase sales to a
specific level within the next four
years.
-Short-range should be derived form an in-depth
evaluation of the
organization’s long-range objectives. Ex. Listing of
priorities.
Major Types of Plans
Guidelines in Implementing Management by
Objectives (MBO)
1. Adapt your objectives directly to organizational goals
and strategic plans.
2. Quantify and target the results whenever possible.
3. Test your objectives for challenge and achievability.
4. Adjust the objectives to the availability of resources and
realities of organizational life.
5. Establish performance reports and milestones that
measure profess toward the objective.
6. Put your objectives in writing and express them in clear,
concise, and unambiguous statements.
7. Limit the number of statements of objectives to the most
relevant key result aread of your job.
8. Communicate you objectives to your subordinates so as
they can formulate their own.
consistency and
mutual support.
10. Modify your statements to meet changing
conditions and
Major Types of Plans
Program
- The actual course of action designed to carry out the
established objective. Indicated use of different
resources in an integrated pattern and establishes a
sequence or required actions and time schedules for
each in order to achieve stated objectives.
Policies
-These are basic guidelines for action. The indicated
what is permitted and what is not permitted. Policies
are broad, general guides for action which constrain or
direct objective attainment. Ex. Promotion policy.
Procedures
-Series of related steps expressed in chronological
order for a specific purpose. It outlines precisely how a
recurring activity must be accomplished.
Rules
-Require specific and definite actions for a given
situation. It permit no flexibility and deviation. Do not
have to specify sequence.
Budget
-Plan stated in financial terms. Estimate of income and
expenditures for a future period.
Philosophy
-The values and beliefs an organization holds as the
guiding light is the company’s philosophy. Usually
passed on by the founder of the organization.
Strategy
- Method of shaping a company’s
Other Types of Plans
12
Standing Plans – serve as guidelines to managerial
action, brings consistency to the operations.
Single-Use Plans – designed for specific purpose or
period. Ex. Budget
Long-Range Plans – these are strategic plans of the
organization. It takes time to achieve this goal.
Intermediate Plans – follow once the long-range plans
are formulated and made for the its realization.
Short-Range Plans – provide guidelines for day-to-
day actions
Marketing Plans – to increase their present market
share and develop new products.
Production Plans – producing the desired amount of
goods demanded at the market place.
Financial Plans – tells the managers how well they
are doing, the need for working capital, need for
expansion
Manpower Plans – determining types of personnel
needed in the long and short-range for the
organization.
Strategic Plans – determining the major goals of the
entire organization and the policies to guide the
achievement of these goals.
Tactical Plans – determination of the short term-
specific utilization of the resources of the org. in
achieving its strategic goals.
Functional Plans – classified by function or use.
Planning Horizon: Short-Range Versus Long-
Range
Short-Range Plans – covers up to one year.
Long-Range Plans – extends into the future
Operational Versus Strategic Plans
Strategic Planning – analogous to top-level long-range
planning
Operational or Tactical Plans – a short-range planning
and concentrate
on the formulation of functional plans – done by managers
at all levels in
the organization.
Decision Making
14
This is the process of choosing a specific procedure or
course of action from among several possible alternatives.
Judgment is important in decision making.
Can be determined by non-quantitative means, such as
intuition, facts, experiences, and opinions.
Can also be determined by quantitative means such as
operations research, linear programming, simulation, etc.
Other Techniques:
•Marginal Analysis
-Used to figure out how much more output will result if one
more variable worker is
added while other factors are being held constant.
•Financial Analysis
-Used for estimating the profitability of an investment,
calculation the payback
period and analyzing cash inflows and outflows.
•Break-Even Analysis
- Total revenue equals total cost and there is no profit.
•Ratio Analysis
-An accounting tool used for the interpretation of
accounting information. Basic financial ratios compare
costs and revenue for a particular period.
•Operation Research Technique
-Defined by Miller and Starr as “Applied Decision Theory”,
which seeks scientific, logical, or mathematical means.
Observation, analysis, hypothesis formulation,
and experimentation.
1. Queuing or Waiting-Line Method
- Balancing waiting lines and services provided. When
people in queues are not going to be provided quick
service, they may go elsewhere.
2. Linear Programming
-Used in involving the allocation of resources or limited
resources to reach a particular objective such as least
cost, highest margin and so on.
3. Game Theory
-Involves selecting the best strategy, taking into
consideration one’s actions and the action of one’s
competitors. When one individual wins, the other losses.
4. Simulation
-Involves the building of a model that represents a real or
an existing system in evaluating and selecting the best
one.
5. Decision Tree
-Through a graphic illustration, alternative solutions can be
identified
The Decision Making Environment
17
Most companies have three levels of management:
 Strategic-Level
-Determine long-term strategies and set corporate
objectives and policy consistent with these objectives.
 Tactical-Level
-Charged with the responsibility of implementing the
objectives and policies set fort at the strategic level of
management.
Operational-Level
-Complete specific tasks as directed by tactical-level
managers.
As a rule of thumb, the higher the decision maker is in
the organization, the more complex and difficult he has
to make. Also, the number of people affected by the
decision increases at the level of the decision maker.
The Decision Making Process
18
Steps in Decision Making Process:
1. Set Objectives
- Decision maker sets the objectives for the
decision.
2. Identify Constraints
- Constraints in some way limit the decision maker’s
choices. Defined by legal, economic, or political
considerations.
3. Identify Alternatives
- Making a choice between two or more alternatives.
Most cases alternatives are chosen
as solution to the problem.
4. Gather Appropriate Information
- Decision maker gathers information that may
provide insight as to which alternative to choose.
5. Evaluate Alternatives
- Decision maker evaluates each alternative.
6. Choose the Most Acceptable Alternative
- Examines the ranking of alternatives and select.
Planning Techniques and Tools
19
1. Forecasting
- An attempt to foretell or predict future trends,
events or conditions from known data and to
prepare for the expected changes in business or
industry.
- Many decisions are based on estimates of
what is likely to happen in the future.
Methods in Forecasting
• Survey Method – involves probing the
customer or respondents through questionnaires or
interviews.
• Trent Method or Time-Series Analysis –
future predicted using past data or information.
• Econometric Models – Based on statistical
methods of analyzing data and making predictions.
2. Scheduling
-Term used for planning time for various activities in an
organization.
-Two basic concepts: Events – identifiable
accomplishments that occurs at a definite point in time.
Activities – the work required to complete the event.
-Three Types of Timing: Optimistic Time (minimum
time if could take), Pessimistic Time (maximum), and
the most probable time. An average of these times
(expected) is computed.
3. Management by Objectives
- The boss and the subordinates function as a team
insetting objectives and accomplishing those
Objectives through cooperation.
Why Managers Fail in Planning
21
1. Lack of Real Commitment in Planning –
lack real commitment by managers from the
top level down to the lowest supervisor.
2. Interchanging Planning Studies with Plans
– nothing is planned unless it includes a
decision of some kind.
3. Failure to Develop and Implement Sound
Strategies – without sound strategy, plans go
in the wrong direction. Unless implemented by
action plan, it becomes only a statement of
wishes and hopes.
4. Lack of Meaningful Objectives and Goals –
clear and attainable?
5. Tendency to Underestimate the
Importance of Planning Premises – plans
and decisions should be consistent and implemented.
6. Failure to See the Scope of Plans – neglecting
other types of plans
7. Failure to See Planning as a Rational Process –
requires clear goals, knowledge of alternatives,
ability to analyze alternatives to come up with the
best possible answer.
8. Too Much Reliance on Experience – what
happened in the past may not likely fit a future
situation.
9. Failure to Use the Principle of Limiting Factor –
anticipating the worst, most problem situation
10.Lack of Top Management Support – top
management does not support, believe and encourage
11.Lack of Clear Delegation – do not know what the
jobs are, how their jobs relate to others, no clear authority
to make decisions.
12.Lack of Adequate Control Techniques and
Information – knowing how well they are doing