Semester I

Management Concepts and Practices

UNIT 1 – PLANNING (ONLY PLANNING PORTION)

1. Planning
a. Definition
b. Types of plans:
i. Mission
ii. Vision
iii. Objectives
iv. Strategies
v. Policies
vi. Procedures
vii. Rules
viii. Programmes
ix. Budgets

2. Classification of plans:
a. Strategic, Tactical and Functional plans
b. Short term and Long term plans
c. Single use and Multiple use plans
d. Financial and Non-financial plans
PLANNING

Planning is essential in every walk of life. Each and every person has to frame a plan to proceed
to achieve his/her schemes. The plan period may be short or long. Planning is the first and
foremost function of management. F.W. Taylor had pointed out in his report on Scientific
Management that planning is separated from execution.

Meaning and Definition of Planning

Planning is an intellectual process of thinking resorted to decide a course of action which helps
in achieving the pre-determined objectives of the organisation in future. Planning provides a clear
sense of direction to the activities of the organisation and to the job behaviour of managers and
others. It strengthens their confidence in understanding where the organisation is heading and
best way to make the organisation move along the chosen path is to achieve the goals of the
organisation.

According to Koontz and O’Donnel, “Planning is deciding in advance what to do, how to do it,
when to do it and who is to do it. It bridges the gap from where we are to where we want to go.”

According to George R. Terry, “Planning is the selecting and relating of facts and the making and
using of assumptions regarding the future in the visualization and formulation of proposed
activities believed necessary to achieve desired results.”

Henry Fayol defined planning as “Planning is deciding the best alternatives among others to
perform different managerial operations in order to achieve the pre-determined goals.”

Characteristics of Planning

1. planning is looking into the future

2. planning involves pre-determined line of action
3. planning discovers the best alternative out of available many alternatives
4. planning requires considerable time for implementation
5. planning is a continuous process
6. planning’s object is to achieve pre-determined objectives in a better way
7. planning integrates various activities of organisation
8. planning is done for a specific period
9. planning not only selects the objectives but also develops policies, programmes and
procedures to achieve the objectives
10. planning is required at all levels of management
11. planning is an inter-dependent process which co-ordinates the various business activities
12. planning directs the members of the organisation
13. growth and prosperity of any organisation depends upon planning
Objectives of Planning
Planning in any organisation serves to realise the following objectives:
1. reduces uncertainty
2. induces co-operation and co-ordination
3. reduces competition
4. achieves the predetermined goals
5. anticipates unpredictable contingencies

Nature of Planning
There are number of ways available to complete a certain job. Planning chooses any one of the
best alternatives out of the available ones. Economy and certainty are considered while selecting
the best alternative. Thus, the nature of planning is briefly discussed below:
 planning is the primary function of management
 planning contributes to objectives
 planning is an intellectual activity
 planning results in higher efficiency
 planning is a continuous process
 planning is flexible
 planning provides unity and consistency
 planning is common to all
 planning is the basis for all managerial functions
 planning coordinates various business activities
 planning considers limiting factors

Importance of Planning
Planning helps the businessman get early success. Success without planning is almost impossible
in business. So, the planning function is very important due to the following reasons:
 planning manages objectives
 planning converts uncertainty into certainty
 planning enables economy in operation
 planning helps in coordination
 planning tackles increasing complexities of business
 planning provides effective control
 efficient utilisation of resources is achieved through planning
 planning avoids business failures

Steps in Planning Process

The planning process is different from one plan to another and one organisation to another.
Given below is a planning process which may be treated as commonly acceptable:
 analysis of external environment
 analysis of internal environment
 determination of objectives
  determining planning premises and constraints
 examination of alternative courses of action
 weighing alternative course of action
 selection of the best alternative course of action
 establishing the sequence of activities
 formulation of action programmes
 determining secondary plans
 securing participation of employees
 follow-up and evaluation

Methods of Planning
According to the usage and nature of planning, the methods or types or components or elements
of planning are divided into the following categories:
 Objective Plans:
Objectives are the basic foundation for planning operation. It also plays an important role in
managerial work of organizing, directing and controlling.

 Standing Plans:
These plans include policies and procedures that are liable for repetitive action. These plans provide
a ready guideline for solving recurring problems and not used for the special problems.

 Master Plans:
It covers the complete course of action along with the consideration of time and strategy. Small plans
are added together in a way to speed up the course of action.

Advantages of Planning

The advantages of planning are as given below:

1. better utilisation of resources
2. helps in achieving objectives
3. minimises future uncertainties
4. improves competitive strength
5. effective control
6. economy in operation
7. provides motivation
8. enables cooperation
9. promotes growth and improvement
10. develops rationality among management executives
11. delegation of authority facilitated
12. encourages innovation
13. prevents hasty judgement
14. reduces red-tapism
15. improves ability to cope with change
 16. creates forward looking attitude in management
17. develops efficient methods and procedures of action
18. anticipation of crisis

Disadvantages of Planning
Though planning is a primary function of management and it facilitates other functions of
management, it suffers from certain limitations as given below:
1. Inflexibility
2. Limitation of forecasts
3. Unsuitability
4. Time consuming
5. Costly
6. Mental ability
7. False sense of security
8. Delay during emergency period

TYPES OF PLANS:

In a large organisation, there are various types of plans that are arranged in a hierarchy within
the organisation. This means that plans at each level have to be consistent with and contributive
to the achievement of plans above them.
 i. VISION
At the top of this hierarchy is the vision. This is the dream that an entrepreneur creates about
the direction that his business should pursue in future. It describes his aspirations, beliefs and
values and shapes organisation's strategy. In fact, visioning is an ongoing process. As the
organisation proceeds, the vision reshapes.
The Tata Group of companies bears the stamp of the lofty ideas of Jamshetji N. Tata. Tata's sense
of trusteeship, his realisation that to survive and prosper, an enterprise must serve the needs of
Indian society, his emphasis on the application of science and technology-all have been brought
to bear on the enterprises that bear his name.
A vision should be brief, focused, clear and inspirational to an organisation's employees. It should
be linked to customers' needs and convey a general strategy for achieving the mission.

ii. MISSION
Next comes mission, which is the unique aim of an organisation that sets it apart from others of its type.
It is an organisation's specialisation in some area-service, product or client, which decides the
organisation's scope of business. Indeed, this may lead to ruling out a customer segment that would
simply be unprofitable or too hard to serve, given the organisation's capabilities. Thus, a university may
have as its mission imparting education to women only or a hospital may treat heart disorders only.

In addition to describing the scope of business (i.e., products and services the organisation provides,
technologies used to provide these products and services, types of markets, important customer needs
and distinctive competencies or the expertise that sets the firm apart from others), the firm's mission
statement may also mention its cultural values.

Like vision, a firm's mission also guides the development of strategies. It establishes the context within
which daily operating decisions are made and sets limits on available strategic options. It is, therefore,
necessary that it is not revised every now and then in response to every new tum in the economy. But it
may change overtime to take advantage of new opportunities or respond to new market conditions.

TESLA
Vision statement: To accelerate the world’s transition to sustainable energy.
Mission statement: To create the most compelling car company of the 21st century by driving the
world’s transition to electric vehicles.

iii. OBJECTIVES

Objectives are goals or aims that the management wishes the organisation to achieve in pursuit of its
mission. These are the end points or pole-star towards which all business activities like organising, staffing,
directing and controlling are directed. Only after having defined these end points can the manager
determine the kind of organisation, the kind of personnel and their qualifications, the kind of motivation,
supervision and direction and the kind of control techniques which he must employ to reach these points.

Objectives should be distinguished from the word "purpose". The purpose of an organisation is its primary
role defined by the society in which it operates. For example, the purpose of every university is to impart
education or the purpose of every hospital is to provide health care. Purpose is therefore a broad aim that
applies not only to a given organisation but to all organisations of its type in that society.

Objectives are the specific targets to be reached by an organisation. They are the translation of an
organisation's mission into concrete terms against which results can be measured. For example, a
university may decide to admit a certain number of students or a hospital may decide to admit a certain
number of indoor patients.

Characteristics of Objectives
1. Objectives are multiple in number
2. Objectives are either tangible or intangible
3. Objectives have a priority
4. Objectives are generally arranged in a hierarchy
5. Objectives sometimes clash with each other

Requirements of Sound Objectives

1. Objectives must be both clear and acceptable
2. Objectives must support one another
3. Objectives must be precise and measurable
4. Objectives should always remain valid
Advantages of objectives
Basically the following benefits result from objectives:
1. They provide a basis for planning and for developing other type of plans such as policies, budgets
and procedures.
2. They act as motivators for individuals and departments of an enterprise imbuing their activities
with a sense of purpose.
3. They eliminate haphazard action which may result in undesirable consequences.
4. They facilitate coordinated behaviour of various groups which otherwise may pull in different
directions.
5. They function as a basis for managerial control by serving as standards against which actual
performance can be measured.
6. They facilitate better management of the enterprise by providing a basis for leading, guiding,
directing and controlling the activities of people of various departments.
7. They lessen misunderstanding and conflict and facilitate communication among people by
minimizing jurisdictional disputes.
8. They provide legitimacy to organisation's activities.

iv. STRATEGIES

Strategy is a term originated in military, which connotes a response to a competitive

environment. In a competitive situation, it is not enough to build plans logically from goals unless
the plans take into account the environmental opportunities and threats and the organisational
strengths and weaknesses. This is commonly referred to as SWOT (strength, weaknesses,
opportunities and threats) analysis. A corporate strategy is a plan that takes these factors into
account and provides an optimal match between the firm and the environment. Two important
activities involved in strategy formulation are environmental appraisal and corporate appraisal.

 Strategy is a deliberate search for a plan of action that will develop a business competitive
advantage and compound it. - Bruce D. Henderson
 A strategic plan is, in essence, a company’s game plan.
 “Strategy is an art of planning to achieve competitive advantage”
 Strategy is consciously considered and flexibly designed scheme
 Strategies are formulated at the corporate, divisional and functional level.
 Corporate strategies are formulated by the top managers.
 These corporate wide strategies need to be operationalized by divisional and functional
strategies
 Strategy can never be perfect, flawless and optimal.
 A company's strategy is typically a blend of:
i. proactive actions
ii. Reactive actions
iii. there is also a need to adapt strategy
 v. POLICIES

A policy is a general guideline for decision-making. It sets up boundaries around decisions,

including those that can be made and shutting out those that cannot. In so doing, it channelises
the thinking of the organisation members so that it is consistent with and contributive to the
organisational objectives. In the words of George R. Terry, "policy is a verbal, written or implied
overall guide, setting up boundaries that supply the general limits and direction in which
managerial action will take place."
Although, policies deal with "how to do" the work, they do not dictate terms to subordinates.
They only provide a framework within which decisions must be made by the management in
different spheres. Thus we may hear that the recruitment policy of a company is to recruit
meritorious people through the employment exchange; or the advertisement policy of a
company is to avoid cut-throat competition with its rivals in the field; or the distribution policy
of a fertiliser company is farmer-oriented. In all these examples, respective policies leave it to the
discretion of the subordinates, the decisions regarding which candidates are meritorious, what
is cut-throat competition and what is to be farmer-oriented. It should be noted that both policies
and objectives guide thinking and action, but with difference. Objectives are end points of
planning while policies channelise decisions to these ends; or, to put it another way, policies lead
to objectives in the way a series of alternate highway routes lead to a city.

Advantages of policies:
The advantages of policies are as follows:
1. Policies ensure uniformity of action in respect of various matters at various organisational
points. This makes actions more predictable.
2. Policies speed up decisions at lower levels because subordinates need not consult their
superiors frequently.
3. Policies make it easier for the superior to delegate more and more authority to his
subordinates without being unduly concerned because he knows that whatever decision the
subordinates make will be within the boundaries of the policies.
4. Policies give a practical shape to the objectives by elaborating and directing the way in which
the predetermined objectives are to be attained.

Guidelines for effective policy-making:

The guidelines for making effective policies are as follows:
1. Policies should, as far as possible, be stated in writing and should be clearly understood by
those who are supposed to implement them.
2. Policies should make their purpose clear, define the appropriate methods, action and
responsibilities and delineate the limits of freedom of action permitted to those whose
actions are to be guided by them.
3. To ensure successful implementation of policies, the top managers and the subordinates who
are supposed to implement them must participate in their formulation.
4. A policy must strike a reasonable balance between stability and flexibility.
5. Different policies in the organisation should not pull in different directions and should
support one another. They must be internally consistent.
6. Policies should not be detrimental to the interest of society. They must conform to the canons
of ethical behaviour which prevail in society.
7. Policies must be comprehensive to cover as many contingencies as possible.
8. Policies should be periodically reviewed in order to see whether they are to be modified,
changed, or completely abandoned and new ones put in their place.

vi. PROCEDURES

Policies are carried out by means of more detailed guidelines called "procedures".
A procedure provides a detailed set of instructions for performing a sequence of actions involved
in doing a certain piece of work.
The same steps are followed each time that activity is performed.

For example, the procedure for purchasing raw material may be:
(i) requisition from the storekeeper to the purchasing department;
(ii) calling tenders for purchase of materials;
(iii) placing orders with the suppliers who are selected;
(iv) inspecting the materials purchased by the inspecting department; and
(v) making payment to the supplier of materials by the accounts department.

Similarly, the procedure for recruitment of personnel may be:

(i) inviting applications through advertisement;
(ii) screening the applications;
(iii) conducting written test;
(iv) conducting interview for those who have passed the written test; and
(v) medical examination of those who are selected for the posts.

Procedures may also exist for conducting the meetings of directors and shareholders, granting
loans to employees, issuing raw materials from the stores department, granting sick leave to the
employees, passing bills by the accounts department, and so on.

Advantages of procedures:
There are several advantages of procedures.
(i) First, they indicate a standard way of performing a task. This ensures a high level of
uniformity of performance in the enterprise.
(ii) Second, they facilitate executive control over performance. By laying down the
sequence and timing of each task, executive's dependence on the personal attributes
of his subordinates is reduced, supervision becomes more routine and discipline is
externalised.
 (iii) Finally, they enable employees to improve their efficiency by providing them with
knowledge about the entire range of work.

Limitations of procedures:
(i) First, by prescribing one standard way of performing a task, they limit the scope for
innovation or improvement of work performance.
(ii) Second, by cutting across department lines and extending into various other
departments they sometimes result into so much duplication, overlapping and
conflict that the actual work does not get done properly and resources are wasted.
Thus, in the aforesaid example, the procedure for purchasing raw material almost
certainly encompasses the store department, the purchase department, the
inspection department and the accounts department.
The above limitations can, however, be overcome if the management reviews and appraises
the procedures periodically with an intention to eliminate unnecessary steps and overlapping
and simplify work.

Difference between policy and procedure

Policy
Policies are general guides to both thinking
and action of people at higher levels.
Policies help in fulfilling the objectives of the
enterprise.
Policies are generally broad and allow some
latitude in decision making.
Policies are often established without any
study or analysis.
Procedure
Procedures are general guides to action only
usually for people at lower levels.
Procedures show us the way to implement
policies.
Procedures are specific and do not allow
latitude.
Procedures are always established after
thorough study and analysis of work.

vii. METHODS

A method is a prescribed way in which one step of a procedure is to be performed. The specified
technique to be used in screening the applications or conducting a written test is a method,
whereas the sequence of steps involved in the recruitment of personnel constitutes a procedure.
The method that is selected for discharging a particular step under the existing conditions may
become outdated in due course of time because of the discovery of better and more economical
methods. The need for better and more economical methods of operation is great because of
the pressure of competition in the markets for the products of the concern.
Methods help in increasing the effectiveness and usefulness of the procedure. By improving the
methods, reduced fatigue, better productivity and lower costs can be achieved. Methods can be
improved in a number of ways. Manual methods of performing a task can be replaced by
mechanical means, or the existing mechanised process may be improved, or work simplified and
unproductive efforts removed by conducting "motion study".
 viii. RULES

Rules are detailed and recorded instructions that a specific action must or must not be performed in a
given situation. In sanctioning overtime to workmen, in regulating travelling allowances, in sanctioning
entertainment bills and in other similar matters, a uniform way of handling them or dealing with the case
has to be followed. These are all covered by the rules of the enterprise, the objective of which is to avoid
repeated reference to higher levels for authorisation of routine matters which occur frequently. Like
procedures, rules also bring in predictability. They make sure that a job is done in the same manner every
time, bringing uniformity in efforts and results.

A rule is different from a policy, procedure or method. It is not a policy because it does not give a guide
to thinking and does not leave any discretion to the party involved. It is not a procedure because there is
no time sequence to a particular action. It is not a method because it is not concerned with any one
particular step of a procedure.

What to cover in how much detail? Unfortunately, no standing plan can be made perfect in its coverage
and details. Too many details limit the operating people's creativity and satisfaction through self-
expression. Similarly, too few details do not meet their security and guidance needs and fail to coordinate
those whose work interlocks.

ix. PROGRAMMES

Programmes are precise plans or definite steps in proper sequence which need to be taken to
discharge a given task. In other words, programmes are drawn in conformity with the objectives
and are made up of policies, procedures, budgets, etc. Thus, an enterprise may have a
programme of opening five branches in different parts of the country or of deputing its
employees for training or of acquiring a new line of business or installing new machines in the
factory or of introducing a new product in the market. The essential ingredients of every
programme are time phasing and budgeting. This means that specific dates should be laid down
for the completion of each successive stage of a programme. In addition, a provision should be
made in the budget for financing the programme. In the absence of these ingredients it may be
a prospect or a hope but it is not a programme.
Thus, a programme for the opening of five branches must earmark money and specific time
periods for
a. Securing the necessary accommodation
b. Recruiting personnel to manage the branches
c. Arranging the supply of goods that are to be sold through the branches

Often a single step in a programme is set up as a project. Thus, if in the above example, a company
is short of qualified personnel, then it may set up a project for hiring and training new employees.
The chief virtue of a project lies in identifying a relatively separate and clear-cut work package
within a bewildering array of activities involved in a programme. A schedule specifies the time
when each of a series of actions should take place. Sometimes, scheduling may be restricted to
nearby actions only and the timing of other actions may be held in abeyance until prospects
become more certain.

x. BUDGETS

According to the Institute of Costs and Works Accountants, London, a budget is "a financial
and/or quantitative statement prepared prior to a definite period of time, of the policy to be
pursued during that period. for the purpose of obtaining a given objective." It is clear from this
definition that budgets are plans for a future period of time containing statements of expected
results in numerical terms, i.e., rupees, man-hours, product-units and so forth. The important
budgets are sales budget, production budget, cash budget, and revenue and expense budget.
The sales budget shows the expected sales of finished goods for a period, the production budget
reflects the anticipated production over a period. A cash budget projects the expected flow of
cash for a period in advance, and the revenue and expense budget shows the anticipated revenue
and expenses for a period.
Budgets are very useful for an enterprise. Being expressed in numerical terms, they facilitate
comparison of actual results with the planned ones and thus, serve as a control device and
yardstick for measuring performance. They also help in identifying and removing dead heads of
expenditure. For example, in zero-based budget the sums appropriated to various heads of
expenditure in previous years are set to zero and the manager is required to justify each
expenditure afresh from scratch.
 CLASSIFICATION OF PLANS:

CLASSIFICATION OF PLANS

Classifications Based
Classifications Based Classifications Based Classifications Based
on the Scope and
on Time Horizon on Frequency of Use on Specificity
Degree of Details

1)Financial And
2) Non-financial Plans
1) Strategic Planning
1) Short Term 1)Single Use Plans
2) Tactical Planning
2) Intermediate 2) Standing Plans Specific Plans,
3) Operational
3) Long Term (Multiple Use Plans) Directional Plans,
Planning
Contingency Plans
And Scenario Plans

I - Classifications Based on the Scope and Degree of Details

1) STRATEGIC, TACTICAL AND FUNCTIONAL PLANS

Strategic Plans:
Strategic plans are made to achieve the overall organisational goals. They achieve strategic goals
through effective allocation of resources over different functional/ product areas. They match
the organisational strengths and weaknesses with the environmental opportunities and threats.
They are comprehensive and general in nature. They are made for all functional areas of business.
They are made by the top-level managers in consultation with board members and middle- level
managers and generally relate to a period of more than 5 years.
The questions most commonly answered through strategic plans are:
(a) What are the ways in which overall goals can be achieved?
(b) How to allocate resources over different areas of the enterprise?
(c) How to respond to the external environment?
 (d) How to coordinate the firm’s internal strengths and weaknesses with its external
environment?
Strategic plans are usually made to plan the growth rate, diversification plans, change the product
line etc.
Tactical Plans:
Tactical plans are the means to support and implement strategic plans. They are made to achieve tactical
goals of the organisation. They are related to departmental goals of the enterprise. These plans are made
by middle-level managers in consultation with lower-level managers and normally relate to intermediate
period of 1 to 5 years. While strategic plans are general in nature, these plans are more specific and
precise.

The important questions answered through tactical plans are:

(a) How to deal with changes in competitors’ policies?

(b) How to deal with changes in the demand for products?
(c) How to increase company’s share in the market?

Operational Plans
Operational plans support the tactical plans. They are made to achieve operational goals of the
enterprise. These plans are highly specific and determine what different sections of the
organisation need to perform. While resources are allocated in strategic plans, their efficient use
to achieve overall organisational goals is ensured by operational plans.
These plans are made by lower-level managers in consultation with middle-level managers and
relate to short periods of time of less than one year, say some weeks, months or even days.
Different single-use and standing plans are made in operational planning to achieve the overall
organisation goals. Plans to meet the delivery schedules, adjust the production schedules, budget
the costs etc. are the common activities performed in operational planning.
These plans related to three types of goals can be diagrammatically represented as
follows:
II - Classifications Based on Time Horizon

2) SHORT TERM, INTERMEDIATE AND LONG TERM PLANS

1. Long-term Plans:

These plans are normally made for a minimum period of 5 years. They relate to goals and usually cover all
functional areas of the business. Future being uncertain, these plans foresee environmental changes (by
applying techniques of forecasting) so that organisations can accept them when they occur. They relate
to investment in fixed assets which generate returns over a long-period of time. They aim to achieve
strategic goals of the organisation over a long time period.

2. Medium-term Plans:

These plans normally relate to a period of one to 5 years. They are the supporting plans that help to
achieve long-term plans. Plans made to analyse the impact of advertisement campaign on expansion of
business into new markets are medium-term plans. These plans usually relate to tactical goals.

3. Short-term Plans:

These plans are normally prepared for a period of one year, though in some cases, these may even relate
to a period of less than one year. They look into immediate future of the company. They are usually made
for specific functional areas. Plans made to retain or promote sales, to train workers (so that labour
turnover rate is reduced) are short- term plans. They relate to operational goals of the enterprise.

III - Classifications Based on Frequency of Use

3) SINGLE USE AND MULTIPLE USE PLANS

Single-Use Plans:

Single use plans are made to serve a specific objective. They cease to exist once the objective is achieved.
They are, thus, short lived plans made for nonrecurring activities. For example, if company wants to install
a machine, it has to plan its purchase; whether it wants to buy a new machine or a second hand machine,
whether it wants to buy or acquire it on lease. Various alternative courses of action will be guided by their
respective returns and costs and once the machine is acquired, the plan does not exist any more. Single
use plans are intended to achieve a particular objective which is not likely to be repeated in future. These
are meant to deal with problems which are non-repetitive and distinct in nature.

Standing plans:

Standing plans are made to deal with situations which occur repeatedly in the organisation. They
standardize the recurrent activities so that routine decisions with respect to such activities can be taken
by lower level managers and top-level managers can concentrate on strategic issues. These plans can be
repeatedly used in similar situations. Managers refer to these plans to deal with problems of recurring
nature and, thus, save time, money and efforts in making decisions every time a problem of the same type
arises. For example, standing plans can be made for dealing with leave cases of employees. Every time an
employee goes on leave, he follows leave rules framed in the standing plans. This saves top managers
from the botheration of personally dealing with leave case of every employee. “Standing plans are
directives that serve to increase organisational effectiveness by standardizing many routine decisions.”

Merits of standing plans:

(a) These plans guide daily behaviour so that managers can delegate part of their work load
to subordinates. Standing plans, therefore, facilitate delegation.
(b) They facilitate co-ordination as there is pre-determined way to solve recurrent
organisational problems.
(c) As the decisions for recurring problems are routinized, organisational efficiency tends
to increase.
(d) They provide ready basis for making decisions and, thus, facilitate fast decision-
making.
(e) They save top managers’ time, money and energy by providing a basis for quick action.

IV - Classifications Based on Specificity

4) FINANCIAL AND NON-FINANCIAL PLANS

Specific plans

Specific plans are well-defined plans that do not allow different interpretations by different managers.
They ensure consistency and continuity in the decisions of managers. These types of plans are apt for
organizations that enjoy stable external and internal environments. Clarity of organizational goals and
objectives is an important prerequisite for formulating effective specific plans. A plan that aims at cutting
the production cost by 3 per cent in one year is an example of a specific plan. These plans are capable of
minimizing and eliminating ambiguity, misunderstanding and other problems associated with any goal
execution. However, these plans can restrict the freedom and creativity of resourceful managers.

Directional plans

Directional plans are general plans that offer a great deal of flexibility to the managers in goal formulation
and execution. They provide a general direction in which the organization proposes to move forward but
there are no specific plans or deadlines.35 Directional plans are best suited for uncertain and volatile
organizational environments. The distinct feature of these plans is that they are sufficiently flexible to
enable an organization to respond quickly to the unexpected developments in the environment. These
plans provide focus to the managers without tying them down to any predetermined and specific course
of action. However, these plans do not have the clarity of specific plans. They may cause misunderstanding
and performance deviations. A plan that aims at increasing the corporate profit between 4 per cent and
6 per cent is an example of a directional plan.

Contingency planning

Contingency plans are the specific actions to be taken by an organization in the case of crisis, setbacks or
unforeseen circumstances. These plans become functional in the event of unexpected happenings with
important consequences for the organization. Organizations operating in vastly uncertain environments
usually develop contingency plans along with strategic, tactical and operational plans. Contingency
planning is a process of identifying what can go wrong in a situation and getting ready with plans for
avoiding, coping or even exploiting them.

“A contingency plan is a plan that outlines alternative course of actions that may be taken if an
organization’s other plan of actions are disrupted or become ineffective.” —William M. Pride

“Contingency plans define company’s response to be taken in the case of emergencies, setbacks or
unexpected conditions.” —Richard L. Daft

Scenario planning

A scenario means a description of scenes. Scenario planning is basically a modern forecasting technique
used in the planning process. It helps in learning about the future by understanding the nature and impact
of the uncertain forces affecting the external environment of an organization. Scenario planning is an
opportunity to generate a clear and imaginative background for thinking how to act in the future. In this
type of planning, group of managers mentally rehearse different scenarios based on their expectation of
diverse changes that could have an effect on the organization.39 In this type of planning, each scenario is
seen as a story that has several possible endings. Group members discuss different endings for each
scenario ranging from the most optimistic to the most pessimistic. They then decide how they would
respond. Scenarios can help in recognizing major changes and likely problems.

Production plans:

“Production plans consist of planning and overseeing the process of converting inputs into value –
enhanced output.” The areas of production plans are: production system, efficiency of operations,
location of company facilities, design of company facilities, and day-to-day process planning. These plans
set the targets of production. They are designed according to production policy of business organisations.
Firms may produce throughout the year, pile inventories and sell them during peak season or produce
only during the peak season of demand. In the latter case, they can diversify into other areas during slack
season to keep their plant and machinery occupied.

Marketing plans:
Marketing plans are designed by marketing managers. They “tell sales and marketing personnel who will
sell what, where, when, to whom, in what quantity and how.” They help to sell the products and develop
new products to increase the share of market; to plan for sale in cash or credit; if it decides to sell on
credit, to determine the credit terms and credit policies for the sales department. Production plans and
marketing plans aim to satisfy consumer needs and are inter-dependent. The production department
produces according to expected sale and sales department sells what is produced.

Financial plans:

Finance managers prepare financial plans for raising and utilizing / allocating financial resources
effectively. These plans meet the fixed and working capital requirements of the firm. They plan for
financial cuts during recessionary economic conditions and raising additional funds during boom. All
departments need funds for their effective functioning. Production department needs raw material for
smooth flow of production and marketing department needs funds for advertising and sales promotion
campaigns. Financial plans contribute to financial strength of the organisation through effective cost
control techniques that reduce cost of operations.

Human resource plans:

These plans make optimum use of the most productive asset of the organisation, its people. They ensure
best match between the employees and their jobs, thus, avoiding manpower shortages and surpluses.
They forecast the demand for labour, analyse the present supply and balance the projected demand and
supply of labour. These plans forecast the size and nature of human resource required by the organisation
to achieve its strategic goals. They identify human resource requirements of the organisation and plan to
satisfy these requirements. They forecast quantitative (how many people are needed) and qualitative
(what type of people are needed) human resource needs of the organisation. They also plan for ways in
which people are developed so that they contribute to organisational goals effectively.