BBA LLB

Paper Code: BBA LLB115

Paper: Principles of Management

Presented by: Dr Swati Jain

s.jain@dme.ac.in
 Unit 2 - Planning And Controlling

2.1 Nature, Scope and Objectives of Planning

2.2 Types of Plans : Strategic, Tactical and Operational Plans

2.3 Planning Process, Interrelationship of Planning and Control

2.4 Nature and Scope of Control

Types of Control and Control Systems, Features of Effective

2.5
Control System

2.6 Process of Controlling

2.7 Traditional and Modern techniques of Controlling

2.8 decision making : Context, Process, Models and Techniques

Topic 2.1 - Nature, Scope and
Objectives of Planning
• Planning is the fundamental management function,
which involves deciding beforehand, what is to be
done, when is it to be done, how it is to be done and
who is going to do it.
• It is an intellectual process which lays
down an organisation’s objectives and develops
various courses of action, by which the organisation
can achieve those objectives. It chalks out exactly,
how to attain a specific goal.
• Planning is nothing but thinking before the action
takes place. It helps us to take a peep into the future
and decide in advance the way to deal with the
situations, which we are going to encounter in future.
It involves logical thinking and rational decision
making.
• “Planning is deciding in advance what to do, how to
do it, where to do it and who is to do it. Planning
bridges the gap from where we are to where we want
to go. It makes possible for things to occur which
would not otherwise happen.” – Koontz and o’
Donnell.

• “Planning is deciding in advance what is to be done.

When a manager plans, he projects a course of action
for the future, attempting to achieve a consistent,
coordinated structure of operations aimed at the
desired results.” – Theo Haimann.

• “Planning is deciding the best alternative to perform

different managerial operations for achieving pre-
determined goals.” – Henry Fayol
Nature & Scope of Planning
• Managerial function: Planning is a first and
foremost managerial function provides the base for
other functions of the management, i.e. organising,
staffing, directing and controlling, as they are
performed within the periphery of the plans made.

• Goal oriented: It focuses on defining the goals of

the organisation, identifying alternative courses of
action and deciding the appropriate action plan,
which is to be undertaken for reaching the goals.

• Pervasive: It is pervasive in the sense that it is

present in all the segments and is required at all the
levels of the organisation. Although the scope of
planning varies at different levels and departments.
• Continuous Process: Plans are made for a specific
term, say for a month, quarter, year and so on. Once
that period is over, new plans are drawn, considering
the organisation’s present and future requirements
and conditions. Therefore, it is an ongoing process,
as the plans are framed, executed and followed by
another plan.
• Intellectual Process: It is a mental exercise at it
involves the application of mind, to think, forecast,
imagine intelligently and innovate etc.
• Futuristic: In the process of planning we take a
sneak peek of the future. It encompasses looking into
the future, to analyse and predict it so that the
organisation can face future challenges effectively.
• Decision making: Decisions are made regarding the
choice of alternative courses of action that can be
undertaken to reach the goal. The alternative chosen
should be best among all, with the least number of
the negative and highest number of positive
outcomes.
To Conclude:
• Planning is concerned with setting objectives,
targets, and formulating plan to accomplish them.
The activity helps managers analyse the present
condition to identify the ways of attaining the
desired position in future. It is both, the need of the
organisation and the responsibility of managers.
Objectives of Planning
 Importance of Planning
•It helps managers to improve future performance, by
establishing objectives and selecting a course of action, for
the benefit of the organisation.
•It minimizes risk and uncertainty, by looking ahead into
the future.
•It facilitates the coordination of activities. Thus, reduces
overlapping among activities and eliminates unproductive
work.
•It states in advance, what should be done in future, so it
provides direction for action.
•It uncovers and identifies future opportunities and threats.
•It sets out standards for controlling. It compares actual
performance with the standard performance and efforts are
made to correct the same.
Limitations of Planning
 Management by Objectives - MBO
• Coined by Peter F Drucker, Management by objectives
(MBO) is a strategic management model that aims to
improve the performance of an organization by clearly
defining objectives that are agreed to by both
management and employees.
• According to the theory, having a say in goal setting and
action plans encourages participation and commitment
among employees, as well as aligning objectives across
the organization.
• MBO also focuses upon monitoring and evaluation of
the performance and progress of each employee
against the established objectives. Ideally, if the
employees themselves are involved in setting goals and
deciding their course of action, they are more likely to
fulfill their obligations.
Steps in Management by Objectives Process
 Benefits of MBO
• Management by objectives helps employees appreciate their
on-the-job roles and responsibilities.
• The Key Result Areas (KRAs) planned are specific to each
employee, depending on their interest, educational
qualification, and specialization.
• The MBO approach usually results in better teamwork and
communication.
• It provides the employees with a clear understanding of what
is expected of them.
• Every employee is assigned unique goals. Hence, each
employee feels indispensable to the organization and
eventually develops a sense of loyalty to the organization.
• Managers help ensure that subordinates’ goals are related to
the objectives of the organization.
 Limitations of MBO
• Management by objectives often ignores the organization’s
existing ethos and working conditions.
• More emphasis is given on goals and targets. The managers
put constant pressure on the employees to accomplish their
goals and forget about the use of MBO for involvement,
willingness to contribute, and growth of management.
• The MBO approach does not emphasize the significance of
the context wherein the goals are set. The context
encompasses everything from resource availability and
efficiency to relative buy-in from the leadership
and stakeholders.
• There is a tendency for many managers to see management by
objectives as a total system that can handle all management
issues once installed and may impose problems on the MBO
system that it is not prepared to tackle.
 Topic 2.2 - Types of Plans :
Strategic, Tactical and Operational
Plans
Types of Planning
 Types of Plans

• Contingency plans wait in the wings in case of

a crisis or unforeseen event and cover a range
of possible scenarios and appropriate
Contingent plans responses for organizational issues for
occurrences that could negatively impact the
business.
 Strategic Plans
• Strategic plans define the framework of the organization’s
vision and how the organization intends to make its vision a
reality.
• It is the determination of the long-term objectives of an
enterprise, the action plan to be adopted and the resources to
be mobilized to achieve these goals.
• Since it is planning the direction of the company’s progress, it
is done by the top management of an organization.
• It essentially focuses on planning for the coming years to take
the organization from where it stands today to where it
intends to be.
• The strategic plan is forward looking, effective and flexible,
with a focus on accommodating future growth.
• These plans provide the framework and direction for lower
level planning.
 Tactical Plans
• Tactical plans describe the tactics that the managers plan to
adopt to achieve the objectives set in the strategic plan.

• Tactical plans span a short time frame (usually less than 3

years) and are usually developed by middle level managers.

• It details specific means or action plans to implement the

strategic plan by units within each division.

• Tactical plans entail detailing resource and work allocation

among the subunits within each division.
 Operational Plans
• Operational plans are short-term (less than a year) plans
developed to create specific action steps that support the
strategic and tactical plans.
• They are usually developed by the manager to fulfill his or
her job responsibilities.
• They are developed by supervisors, team leaders, and
facilitators to support tactical plans.
• They govern the day-to-day operations of an organization.
• Operational plans can be −
* Standing plans − Drawn to cover issues that managers
face repeatedly, e.g. policies, procedures, rules.
* Ongoing plans − Prepared for single or exceptional
situations or problems and are normally discarded or replaced
after one use, e.g. programs, projects, and budgets.
 Contingent Plans
• Also known as ‘special planning’, it is used for situations
when changes cannot be foreseen.
• Though managers acknowledge the changes before-hand yet
contingency plans help to tackle the unseen changes. With the
complicated business world, the contingency plan becomes
more of a use.
• It is that ‘what if’ scenario that a business manager needs to
consider so that the company does not face losses.
• Probably the recent damaging ‘what if’ scenario for many
businesses was the pandemic. It was unprecedented. Many
organisations that did not have a solid contingency plan had to
lay off their employees, and most small businesses had to shut
shop completely. The ones who did, shifted their focus to
growth prospects in the cloud or digital technologies.
 Topic 2.3 - Planning Process,
Interrelationship of Planning and
Control
 Planning Process
Perception of Opportunities
Perception Of Opportunities

• This is not an actual step in the planning however before

going for the planning process one has to study & find
opportunities in the environment.
• If an opportunity does not exist in the surrounding whole
planning process may fail. So to make planning more
successful one has to study legal, political framework or
existing position, change in customer mindset change in
technology competition, the present position of the industry
level.
• The organization has to analyze its own strengths &
weakness if the good opportunity is existing in the
surrounding organization can proceed to the next step.
Establishment of Objectives

• This is the primary step in the process of planning which

specifies the objective of an organisation, i.e. what an
organisation wants to achieve.
• The planning process begins with the establishment of
objectives.
• Objectives are end results which the management wants to
achieve by its operations.
• Objectives are specific and are measurable in terms of units.
• Objectives are set for the organisation as a whole for all
departments, and then departments set their own objectives
within the framework of organisational objectives.
Planning Premises
• Planning is essentially focused on the future, and there are
certain events which are expected to affect the policy
formation.
• Such events are external and internal in nature and affect the
planning adversely if ignored.
• Their understanding and fair assessment are necessary for
effective planning.
• Such events are the assumptions on the basis of which plans are
drawn and are known as planning premises.
• External environment may includes the study of economy,
national income, availability of natural resources, Political,
social, legal, technology, Competitors plan –their status in the
market etc. (PESTLE analysis or PEST analysis)
• While internal environment will include availability of the
workforce, Availability Of funds, cost-effectiveness, Brand
strength, market share and other company strengths.
Identification of alternatives
• This is an important step where companies find various
alternatives to achieve a particular objective.
• Effort should be made to identify maximum possible
alternatives so that a fair evaluation can be done.

Evaluation of Alternatives
• In this step, the positive and negative aspects of each
alternative need to be evaluated in the light of objectives to be
achieved.
• Various alternatives are evaluated for different criteria like cost,
future competition, generation of profit, the requirement of
manpower, risks and returns etc, within the planning premises
and within the availability of capital. Out of this best suitable
alternative is been selected
Choice of alternative
• After the evaluation of the various parameter, the best
alternative is selected. This alternative is selected by keeping in
the view of environmental factors, planning process &
objectives.
• The best plan, which is the most profitable plan and with
minimum negative effects, should be adopted and implemented.
• In such cases, the manager’s experience and judgement play an
important role.
Formulation Of Supporting Plan
• Once the best alternative or plan is selected, various supporting
plans are prepared to support the main plan like Buying of raw
material, Recruitment of new staff, Training of staff,
Advertisement plan, Buying of equipments etc as per the
requirement.

Establishing a sequence of activities

• Once the supporting plan was prepared the sequence of actions

are decided for eg Who will do a specific task when it will be
completed what exactly he has to do etc
 Interrelationship of Planning and Control
• Planning and controlling are inseparable twins of
management which always co-exist or have to exist together
as one function depends on the other.

• Planning decides the control process and controlling provides

a sound basis for planning.

• Once a plan becomes operational, controlling is necessary to

monitor the progress, measure it, discover deviations and
initiate corrective measures to ensure that events conform to
plans. Thus, planning without controlling is meaningless.
Similarly, controlling is blind without planning. If the
standards are not set in advance, managers have nothing to
control.
Interrelationship of Planning and Control
• Planning Precedes Controlling: In planning the objectives or
targets are set and in order to achieve these targets control
procedure is needed. So planning precedes control.
• Controlling Sustains Planning: Controlling directs the course of
planning. Controlling spots the areas where planning is required.
• Controlling Provides Information for Planning: In controlling
the real performance is compared to the standards set and records
the deviations, if any. The information collected for exercising
control is used for planning also.
• Controlling measures plans: Controlling measures are taken in
accordance with the pre-determined plans, programs, and targets.
Planning is the initial step and controlling is in the process and
required at every step.
• Planning and controlling, both are forward-looking: Both
planning and controlling aim at the future prospects of the
business. Planning is always for future and control is also
forward-looking. Their combined efforts are to reach maximum
output with a minimum of cost.
Topic 2.4 - Nature and Scope of
Control
• Controlling is one of the most basic functions of
management, like planning, organizing, staffing, etc.
Controlling is an important function, and without
controlling management can’t ensure the desired
results.

• Controlling means the management of the organization

is responsible for deciding predetermined standards
and making sure that performance of the employees
match with the standards set by the management and in
case if the performance of employees does not match
with standards then taking required corrective
measures.
• Role of the management of an organization is to make
sure that the goals of the organization are achieved as
planned and on time.
Concept of Controlling
 Scope of Controlling
• Controlling is a dynamic process: Controlling is a dynamic
process. A manager is required to take a different course of
actions when an employee fails to match the standards of
performance. The course of action may be different for
different employee.
• Planning and controlling go hand in hand: The
performance standards are decided before the work is
assigned to the employees. without planning, controlling is
meaningless, and without controlling planning can’t go as
desired
• Controlling is an end function: Controlling is an end
function because it comes into action once the task is
completed. If the performance of the employees is same as
that of the standard performance then no actions are required
to be taken but in case the performance doesn’t match then
the manager is required to take the corrective actions.
 Scope of Controlling
• Controlling is a pervasive function: It is a pervasive
function because it can’t be escaped at any level of the
management. All management is required to control at all
levels. Top-level manager will control the actions of a
middle-level manager and supervise the performance of the
manager and similarly, a low-level manager is answerable to
a middle-level manager.

• Controlling is looking forward: A manager can control the

performance of an employee by controlling the past actions.
A manager keeps track of the performance of the employee,
so that follow up can be made when the time comes to
compare the performance.
Importance of Controlling
Advantages of Controlling
Limitations of Controlling
Topic 2.5 - Types of Control and
Control Systems and Features of
Effective Control System
 Types of Control
• Predictive/ feedforward control: This type of
control helps to foresee problem ahead of
occurrence. Therefore action can be taken before
such a circumstance arises.
• Concurrent control: It is also called real-time
control. It checks any problem and examines it to
take action before any loss is incurred. Example:
control chart.
• Feedback Control: This process involves
collecting information about a finished task,
assessing that information and improvising the
same type of tasks in the future.
 Control Systems
• For businesses to succeed, managers have to manage
multiple departments with different responsibilities. To
organize many team’s efforts into one successful
product or service, businesses often use management
control systems. Having an organized approach to
defining goals and measuring results can help
businesses create unified and highly productive
workplaces.

• A management control system (MCS) is a system

which gathers and uses information to evaluate the
performance of different organizational resources like
human, physical, financial and also the organization as
a whole in light of the organizational strategies pursued.
 Control Systems
• Companies use business software or data collected to
track progress in certain metrics, such as financial
earnings, hours or units of product. Businesses can
adapt management control systems for the many
departments they rely on for success, and some
companies may use several management control
systems.

• Analyzing the information in a management control

system helps managers understand where they can
make improvements in a company's or department's
day-to-day operations. Clear feedback from the system
often helps them determine specific obstacles that may
hinder goals and find sensible fixes.
Components of a management control system
• Clear managerial assignments: Companies have managers with
different responsibilities. It is important to understand what every
department is working toward so each manager can be
accountable for meeting objectives.
• Bureaucratic control: Well-designed bureaucratic controls aim
to answer questions ahead of time so staff can resolve issues
quickly.
• Financial controls: managers closely monitor financials to
identify the adjustments they need to remain aligned with the
business's goals.
• Quality controls: This can create better production processes,
increase sales, optimize how a team or company uses its
resources and improve customer satisfaction.
• Normative controls: Normative controls are behavior-based
patterns that unify a team in its approach and attitude toward
goals. They often are less formal than other controls that use
number-based indicators of success.
Features of Effective Control System
Topic 2.6 - Process of Controlling
 Process of Controlling
The process of controlling in management consists of four
steps. All of these steps are necessary to be followed in
order to control effectively.
• Sec A (Attempt any 2)5 marks each
• Q1
• A-----2.5
• B-----2.5
• Q2
• Q3
• Sec B (Attempt any 2)10 marks each
• Q1
• Q2
• Q3
Establishing standards:

• This means setting up of the target which needs to

be achieved to meet organisational goals eventually.
Standards indicate the criteria of performance.

• Control standards are categorized as:

– Quantitative standards – expressed in terms of
quantities like targets, profits, monetary aspects etc
– Qualitative standards - expressed in terms of
intangible items like work quality, customer
satisfaction, brand value, corporate image etc

• The manager prepares a report stating the standards

expected from the project given to employees.
Measurement of actual performance:

• Once the task is completed, it is the job of the

manager to measure the performance of the
employees. The manager will analyze the
performance of each employee and ask them to
submit their report of work.

• With the increasing levels of management, the

measurement of performance becomes difficult.
Comparison of actual performance with the standard:
After the measurement of the actual report, a comparison is
made between the actual performance and the pre-decided
standard performance and the difference is calculated
between both the performances and a report is generated
after the analysis of the performance of all employees.

Taking corrective actions:

• After comparing the standard performance with the
actual performance, corrective actions are initiated by
the manager as per the policy of the company.
• Taking corrective actions is important; otherwise,
employees would start taking their job lightly, and there
are chances that you might lose business in the future.
 Topic 2.7 - Traditional and
Modern techniques of Controlling
• There are various techniques of managerial control which
can be classified into two broad categories namely-

• Traditional Techniques
– Personal observation
– Statistical reports
– Break-even analysis
– Budgetary control

• Modern Techniques
– Return on investment
– Ratio analysis
– Responsibility accounting
– Management audit
– PERT & CPM
– MIS
Personal observation:
• Personal observation is the most traditional technique of
control. It helps a manager to gather first-hand information
about the performance of employees. It also creates
psychological pressure on employees to improve their
performance because they know they are being watched
personally by the manager.

• Managers generally note down their observations. With the

help of these observations, they can easily analyze the
performance of employees. By comparing the performance
chart of current year with the previous year the managers can
know the progress of their performance.

• However, this technique is not to be used effectively in all

types of jobs as it is very time-consuming.
Statistical Report:
• ‘Statistical report’ or Quantitative control is often used on the
basis of analysis of statistical reports prepared by various
managers or top executives of an organization.
• Analysis of statistical data in terms of average, percentage,
ratio, correlation etc. is very helpful in controlling inventory,
quality, and production, etc.

• Statistical reports are analytical documents in the form of

tables, charts, graphs, etc. They provide factual data and
trends that are useful for managerial control. These reports
suggest whether the prescribed policies are being
implemented.

• By converting performances report into statistical chart or

table you can easily point out the progress or deviation of
performance.
Break-even analysis:
• Break even analysis is a useful technique to study
relationship between sales volume and costs and profits.

• Break even point is a point of no profit and no loss. When

sales reaches break even point, it refers to the sale amount at
which company is neither earning profit nor incurring loss.
With the help of break even analysis technique manager can
estimate profits at various levels of cost and revenue.

• Break even chart helps the firms to keep a close check on

their variable cost and determine the level of output at which
firm can earn its target profit. It also helps to measure the
points at which all the costs are fully covered and beyond
that point can each more profit.
Budgetary control:
• Budget is a statement of expected results and expected cost
expressed in numerical terms. Budget helps us to know the
future results and to achieve these results how much we will
have to spend. There are different types of budgets which
can be prepared by an organization such as sales budget,
production budget, financial budget, cash budget etc.
• Budget focuses upon standards and objectives of the firm
and helps subordinates to compare their performance with
budgetary standards and can do self appraisal.
• Through Budgeting managers can allocate resources to
departments according to their budgetary allocation.
• Success of Budgetary techniques depend upon the
estimation of standards. As far as possible we should
prepare flexible budgets due to dynamic environment.
Return on investment:
• This technique is also known as return on capital employed.
The essence of this approach is that profit is not taken as an
absolute figure, but it is considered in relation to capital
invested.

• With this method we can compare the earnings of one

company with other even when they have invested different
capital because it determines the ratio of earning and not the
absolute earning. The rate of return can be calculated by
using following formula:
Ratio analysis :
• It refers to evaluation and analysis of financial statements by
calculating some important ratios.

• The common ratios which help to draw important

conclusions from the financial statements are Liquidity ratio,
Solvency ratio, Profitability ratio, Turnover ratios etc.

• These ratios help in knowing whether the resources are

effectively used for increasing the efficiency of operations
of business or not.
Responsibility Accounting:
• Under this technique of controlling organization is divided
into various responsibility centers. Each center generally
has various sections or departments of an organization and
the head of the department is considered as “Responsibility
Head”.

• The responsibility head is responsible for the overall

growth and attaining the target of his department or center.

• Following are the various types of centers:

» Cost Centre
» Revenue Centre
» Profit Centre
» Investment Centre
Management Audit:
• This control technique helps to measure the efficiency level
of managers. Financial audit has been used by firm from
long time but the management audit is a new concept.

• Management audit is a comprehensive and constructive

review of the performance of management team of any
organization. It aims at reviewing the efficiency and
effectiveness of management and improving its future
performance.

• It reviews overall plan and policies of managers and would

highlight possible opportunities for the organization. It
ensures updating of existing managerial policies and
strategies in the light of environment changes.
PERT and CPM (Network Techniques) :
• PERT (Programme Evaluation and Review Technique) and
CPM (Critical Path Method) are two important techniques
used in both planning and controlling.

• These techniques are used to compute the total expected

time needed to complete a project & it can identify the
bottleneck activities that have a critical effect on the project
completion date.

• Such techniques are mainly used in areas like construction

projects, aircraft manufacture, ship building etc.

• The project is first divided into various activities and then

these activities are arranged in a logical sequence. A network
diagram is prepared showing the sequence of activities and
time estimates are laid down for each activity. Based on
these the most appropriate method is used.
Management Information System (MIS):
• Management Information System (MIS) is a computer based
information system which provides accurate, timely and up-
to-date information to the managers for taking various
managerial decisions.

• It is not only an important communication tool but also an

important control technique. It provides timely information
to the managers so that they can take appropriate corrective
measures in case of deviations from standards.

• It facilitates collection and management of information at

different levels and departments of the organisation and
ensures cost effectiveness by providing all important
information to the management in time.
Topic 2.8 - Decision making :
Context, Process, Models and
Techniques
• Decision making is a type of participatory process in
which multiple individuals acting collectively, analyze
problems or situations, consider and evaluate alternative
courses of action, and select from among the alternatives
a solution or solutions.

• The nature and composition of teams, their size,

demographic makeup, structure, and purpose, all affect
their functioning to some degree. The external
contingencies faced by teams (time pressure and
conflicting goals) impact the development and
effectiveness of decision-making and problem solving as
well.

• Decision-making techniques are different ways to

approach making a decision during a discussion with your
team in efforts to problem solving.
Process of Decision Making