Unit2 - Planning

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 Planning
According to Fayol - "The plan of action is, at one and the same
time, the result envisaged, the line of action to be followed, the
stages to go through, and the methods to use. It is a kind of
future picture wherein proximate events are outlined with some
distinctness...."

Planning is deciding in advance what is to be

done. It involves the selection of objectives,
policies, procedures and programmes from
among alternatives.
THE NATURE & PURPOSE OF PLANNING:

Planning is the If you want to manage

keystone effectively the
management performance of
function A manager individuals and
must plan before he organization, you must
can possibly organize understand the concept
staff, direct and of and the necessity for,
control. planning.
 Nature of planning
Planning is a
intellectual
process. It •What is to be done?
requires a
manager to •When is to be done?
think before
acting. Planning
•How is to be done?
facilitates •Who is to do it?
managers to
decide
 TYPES OF PLAN
1. OPERATIONAL PLAN
2. TACTICAL PLAN
3. STRATEGIC PLAN
4. CONTINGENCY PLAN
 ADVANTAGES OF PLANNING
1. Help in achieving Objectives
2. Better utilization of Resources
3. Effective Control
4. Coordination
5. Encourage Motivation
6. Guides in Decision Making
7. Improves Efficiency
 Limitation of Planning
1. Lack of Accurate Information
2. Time and Cost
3. Inflexibility
4. Delay during emergency period
5. False sense of Security
 Objectives
Objective are defined as the important end points
toward which organizational and individual
activities are directed.
• Objectives are
1. Long term (or) Short term
2. Broad (or) specific
 Effectiveness and efficiency
• Effectiveness:
Achievement of objectives.
• Efficiency:
Efficiency is the achievement of the ends
with the least amount of resources.
 Objectives
• Objectives are either tangible or intangible.
• Objectives have a priority.
• Objectives are generally arranged in a
hierarchy.
• Objectives sometimes clash with each other.
 Setting objectives
• The organizational hierarchy shows, that managers at different
levels have different kinds of objectives.
• The top level managers are keen in determining the purpose,
mission and the overall objectives of the firm.
• The low level managers are involved in setting objectives for
the department and units as well as of their subordinates.
• Some organization use top-down approach and some are
bottom-up approach in setting objectives.
 Guidelines for Objective Setting
• Objective should cover the main feature of the
job.
• Objectives must be clearly specified in writing.
• Objectives must be periodically reviewed.
• Short term objective should be connected to
long term objective.
• Objectives must set by considering various
factors affecting the achievement.
• It should be coordinated with these of other
managers and organizational units.
 SMART Objective
S – Specific
M – Measurable
A – Achievable
R – Relevant
T – Time Bounded
 MANAGEMENT BY OBJECTIVE (MBO)

• Management by objective (MBO) integrates many key

managerial activities in a systematic manner and that is
consciously directed towards the effective and efficient
achievement of organizational and individual objectives.
• MBO is also defined as a comprehensive goal driven success
oriented, management system
• MBO is used for performance appraisals.
• It is used as an instrument for motivating individuals.
 Features of MBO

• An attempt is made by the management to integrate the goals

of an organization and individuals. This will lead to effective
management.
• MBO tries to combine the long range goals of organization with
short goals.
• A high degree of motivation and satisfaction is available to
employees through MBO.
 The Process of MBO
• Setting Preliminary objectives
• Fixing key result areas
• Setting sub-ordinate’s objectives
• Recycling objectives
• Matching resources with objectives
• Periodic performance reviews
• Appraisal
 Weakness of MBO
• Failure to teach the philosophy of MBO
• Difficulty of setting Goals
• Emphasis on short-term goals
• Time consuming
• Failure to give guidelines to goal setters
• Increased paper work
• Danger of Inflexibility
 Benefits of MBO
• Improvement of Managing
• Clarification of Organization
• Personnel Satisfaction
• Team work
• Development of Effective control
• Fast decision-making
Nature and purpose of strategies and policies
• Strategies and policies are closely related. Both give direction, both are the
framework for plans, both are the basis of operational plans, and both affect
all areas of managing.
• Strategy
Strategy refers to the determination of the purpose and the basic long-
term objectives of an enterprise, and the adoption of course of action and
allocation of resources necessary to achieve these aims. Therefore, objective
are a part of the strategy formulation.
 Policies
• Policies
Policies are general statements or understandings that guide managers thinking in decision making.
They usually do not require action but are intended to guide managers in their commitment to the
decision they make.
The essence of policy is discretion. Strategy, on the other hand, concerns the direction in which
human and material resources will be applied in order to increase the chance of achieving selected
objectives.
Policies
 Policy formulation process
• Definition of policy area
• Definition of policy alternative
• Evaluation of policy alternative
• Choice of policy
• Communication of policy
• Implementation of policy
• Review of policy
 Types of Policies
• Formulated policy
• Appealed policy
• Imposed policy
• Written policy
• Implied policy
 Strategic Planning Process
– Mission and Objective
– Environmental Analysis
– Corporate Analysis
– Identification of Alternatives
– Strategic Decision making
– Implementation
Major kinds of strategies and policies
• Products or services:
A business exists to furnish products
or services. In a very real sense, profits are
merely a measure of how well a company serves
its customers.
Major kinds of strategies and policies
The key questions in this area can be summarized as follows:
What is our business?
Who are our customers?
What do our customers want?
How much will our customers buy and at what price?
Do we wish to be a product leader?
What advantage do we have in serving customer needs?
Major kinds of strategies and policies
• Marketing strategy:
Marketing strategies are designed to
guide managers in getting products or services
to customers and in encouraging customers to
buy.
Major kinds of strategies and policies
The key questions that serve as guides for establishing a
marketing strategy are these:
Where are our customers, and why do they buy?

How do our customers buy?

How is it best for us to sell?

Do we have something to offer that competitors do not?

Do we need, can we supply, supporting services?

What are the best pricing strategy and policy for our operation?
Major kinds of strategies and policies
• Growth strategies
• Personnel
• Finance
• Organizational
Major kinds of strategies and policies

The key questions that serve as guides for establishing

a growth strategy are these:

How much growth should occur over a time period?

How fast it should be achieved?

How should it occur?

Effective implementation of Strategies
• Industry analysis:
In the analysis of the industry, five forces were found they are
1. The competition among companies
2. The threat of new companies entering the market.
3. The possibility of using substitute products or services
4. The bargaining power of the buyers or customers.
5. The bargaining power of the suppliers.
 Major kinds of strategies and policies
• Overall cost leadership strategy:
This strategic approach aims at reductions in cost based
on experience.
Major kinds of strategies and policies
• Differentiation strategy:
A company following a differentiation
strategy attempts to offer something unique in
the industry in respect to products or services.
Major kinds of strategies and policies
• Focused strategy:
A company adopting a focused strategy concentrates on
special groups of customers, a particular product line, a specific
geographic region, or other aspects that become the focal point
of the firms efforts.
 Forecasting
• Forecasting is the technique of estimating the relevant future events and problems on
the basis of past and present behaviour or happenings.
• Forecasting is a systematic guessing of the future course of events with the help of
analysis of past and present events.
 Features of forecasting
1. Forecasting is concerned with future events.
2. Forecasting is necessary for planning process
3. The impact of future events has to be considered in the
planning process.
4. The analysis of various factors may require the use of
scientific, mathematical and statistical techniques.
 Forecasting process
1. Thorough preparation of foundation:
Detailed investigation and complete analysis of the company are
necessary for forecasting.
Forecasting is based on the organizational structure of the
company and its past performance.
Besides this, the extent of the dependence of one factor on other
factors which ensure the growth of a company has to be studied.
 Cont.…
2. Estimation of future:
The prosperity of the future can be estimated with
the help of past experience and performance as well as the
talents possessed by top management executives.
The brightness of future period can be estimated in
consultation with the key personnel and it may be
communicated to all the employees of the business unit.
 Cont.…
• Collection of results:
All the information can be collected. Relevant records
are prepared and maintained to collect the results. Nothing can be
omitted and irrelevant information can be avoided while collecting
the results.
• Comparison of results:
The actual results are compared with estimated results to
know deviations. If there are significant deviations between the
estimation and actual results, the reasons for such deviations can be
investigated.
 Cont.…
• Refining the forecast:
The forecast can be refined in the light of
deviations which seem to be more realistic. If any factors or
conditions have changed during the period of study, then those
actors or conditions have to be taken into consideration for the
future estimation.
In this way, the forecast can be refined and
improved.
 Forecasting techniques
• Various techniques of forecasting are used in the field of
business because the future of any business can never be
predicted with certainty.
1. Similarity events method:
It is otherwise called Historical Analogy method. In this
method, forecast is made on the basis of events happened in the
past which are most similar to current events.
 Forecasting techniques
• Jury of executive option:
The opinion of experts is sought under this method
and the meritorious one is accepted. For example, an opinion on
profitability of starting a new unit is received from various
experts and decision is made on the basis of experts opinion.
 Forecasting techniques
• Survey method:
Field survey can be conducted to collect information
regarding the attitude of people. For example, information may
be collected through surveys about the savings habits of the
public.
 Forecasting techniques
• Sales person’s opinion:
The sales force of the existing
product can be forecast with the help of opinion
of sales persons. Sales persons are very closer to
the consumers and customers.
 Forecasting techniques
• Expectation of consumer:
Under this method, a survey is
conducted in order to know the future needs of
consumers. An overall forecast can be made on
the basis of the expectations of consumers.
 DECISION MAKING

• Decision making is defined as the selection of course of action

from among alternative. It is the core of planning. A plan cannot
be said to exist unless a decision has been made.
• Managers sometimes see decision making as their central job
because they must constantly choose what is to be done, who is
to do it and when, where and how it will be done. Decision
making is the part of planning and everyone’s daily living.
 DECISION MAKING PROCESS
• Identification of Problems
• Diagnosis and Analysis
• Search of Alternatives
• Evaluation of Alternatives
• Selection of Alternatives
• Implementation and follow up
 RATIONALITY IN DECISION MAKING;

• It is the rational decision making that goals cannot be attain

without action.
• People acting or deciding rationally are attempting to reach
some goal that cannot be attained without action. They must
have a clear understanding of alternatives.
• They must have ability and information to analyse and evaluate
alternatives in order to achieve goals.
• Finally they must have desire to come the best solution by
selecting alternative.
 STEPS IN DECISION MAKING
• There are three steps in decision making.
1- THE SEARCH FOR ALTERNATIVES.
The first steps of decision making are to develop alternatives. There are
almost always alternatives to any course of action. If we think of only one
course of action,
clearly we have not thought hard enough.
The ability to develop alternatives is often as important as being able to
select correctly from among them.
One of the other hand ingenuity research and common sense will often
unearth so many choices that all of them cannot be evaluated. The manager
needs help in this situation, and this help can be solved by decision making.
 Contd…
1. EVALUATION OF ALTERNATIVES.
When an appropriate alternative has been found, the next steps in
planning one best alternative to achieve the goals. There are three ways of
evaluated decision making.

A)- QUANTITIVE AND QUALITIVE FACTOR

Quantitative factor can be measured in numerical terms. This factor is
vary important but the success of the venture would be endangered
qualitative factors were ignored.
Qualitative factor are those that are difficult to measure numerically such
as the quality of labour relations, the risk of technological change etc.
 Contd……
B)- MANAGERIAL ANALYSIS
In evaluating alternatives managerial analysis is very important.
Marginal analysis can be used in comparing factors other then costs
and revenue. For example to find
the best output of a machine, inputs could be varied against outputs
until the additional input equals the additional output.
C)- COST EFFECTIVENESS ANALYSIS
Cost effectiveness analysis seeks the best ratio of benefits and
costs. For example finding the least costly way of reaching
objectiveness is a technique for choosing the best plan.
 Contd…
2. SELECTING AN ALTERNATIVE
During the selection among the alternatives, managers can use three basic approaches
(1) Experience (2) Experimentations (3) research and analysis.
 Contd….
• EXPERIENCE
Reliance on past experience plays a larger part in decision
making to some extent, experience is the best teacher.
The very fact that managers have reached there position appears
to justify their past decisions. Moreover, the process of thinking
problems through making decisions and seeing programs
succeed or fail.
 Contd….
• EXPERIMENTATION
One way of deciding among alternatives is to try one of them and see what
happens.
Experimentation is often used in scientific theory. The experimental technique can
be most expensive, especially if a program requires heavy expenditures firm cannot
afford to attempt several alternatives.
• RESEARCH AND ANALYSIS
One of the most effective techniques for selecting from alternatives is research and
analysis of decisions. This approach means solving problems by first comparing it.
It is pencil and paper approach to decision making
 Creativity and innovation
• An important factor in managing people is creativity. A
distinction can be made between creativity and innovation.
The term creativity usually refers to the ability and power to
develop new ideas. Innovation, on the other hand, usually
means the use of these ideas. In an organization this can mean
a new service, or a new way of doing things.

•C I
 The creative process
• The creative process is seldom simple and linear. Instead, it generally consists of
four overlapping and interacting phases.
 The first phase, unconscious scanning, is difficult to explain because it is beyond
conscious. This scanning usually require an absorption in the problem, which
may be vague in the mind.
 The second phase, intuition, connects the unconscious with the conscious. This
stage may involves a combination of factors that may seem contradictory at first.
For example one company conceived the idea of a decentralized division
structure with centralized control, concepts that seem to contradict each other.
 Cont..
• Intuition needs time to work. It requires that people find new
combinations and integrate diverse concepts and ideas. Thus
one must think through the problem. Intuitive thinking is
promoted by several techniques such brainstorming and
synectics.
 Cont..
• Insight, the third phase of the creative process is mostly the
result of hard work. For example, many ideas are needed in the
development of a usable product, a new service, or a new
process.
• What is interesting is that insight focused on the problem at
hand. Moreover, new insight may last for only a few minutes,
and effective managers may benefit from having paper and
pencil ready to make notes of their creative ideas.
 Cont..
• The last phase in the creative process is logical formulation or
verification. Insight needs to be tested through logic or
experiment . This may be accomplished by continuing to work
or by inviting critique from others.
 Brainstorming
• Creativity can be taught. Creativity thought`s are often the
fruits of extensive efforts. Some techniques focus on group
interactions, others focus on individual actions.
• One of the best-known techniques for facilitating creativity has
been developed by Alex F. Osborn, who has been called “the
father of brainstorming”.
 Cont..
• In the brainstorming session, a multiplication of ideas is sought.
The rules are as follows.
1. No ideas are ever criticized
2. The more radical the ideas are, the better
3. The quantity of idea production is stressed.
4. The improvement of ideas by others is encouraged.
Brainstorming, which emphasis group thinking, was widely
accepted after its introduction.
 The creative manager
• Creative people are inquisitive and come up with many new
and unusual ideas: they are seldom satisfied with the status quo.
Although intelligent, they not only rely on the rational process
but also involve the emotional aspects of their personality in
problem solving.
• They appear to be excited about solving a problem, even to the
point of tenacity. Creative individuals are aware of themselves
and capable of independent judgment. They object to
conformity and see themselves as being different.
 Two Marks
• Define planning.
• Define an objective.
• Define policies.
• Classify the types of policies.
• Define planning premises.
• What are the practices made in making effective
premising?
• List the quantitative forecasting techniques.
• Define MBO.
• What are the demands that should be met by the selective
objectives?
• List few benefits of MBO.
• Define strategy.
• What is forecasting?