LESSON 2

PLANNING
Prepared by: UY, Maeri Jullianna

General Definition
Planning
- A method for doing or making something and consisting of a goal and
a course of action
- It should specify, at a minimum, what you will do, how you will do it,
and by when you’ll get it done.

Definition in Management

- The process of setting the objectives to be accomplished by an organization

during a future time period and deciding on the method of reaching them.
- It is a never-ending activity and is different for each manager:

- Top managers spend a greater portion of their time planning, their

plans extend further into the future and bridge the gap between where
the organization is currently at and where it plans to go.

Other Terms

Goals

- A specific result to be achieved, the result, critically appraising the present

position of an organization, setting objectives.

Objectives
- A specific result toward which effort is directed.

Planning at Different Levels of Management

Top-Level Management

- Perform long-range planning that encourages that encompasses the whole

organization.
- Example: corporate missions, objectives, and major policies and strategies)

Middle-Level Management

- Concerned with the planning of more specific objectives of implementing the

general goals of top-level management.
First-Level Management
- Responsible for scheduling of workers and developing the procedures for
doing.

Importance of Planning

- For actions to be both effective and efficient

- To anticipate possible problems and difficulties in pursuing a course of action
and anticipated

Process in Planning

1. Identification of Opportunities & Threats

a. Involves collecting and analyzing relevant information.

2. Evaluation of Present Situation

a. Determine the gap between the desired level of performance and

its present levels of performance
3. Setting Goals & Objectives

a. Organizations formulate in three pages:

I. Statement of purpose or reason for being

II. Statement scope of activities it will undertake to achieve the
purpose.
III. Statement of objectives clarifies the level of performance to be
achieved in these activities.

4. Determining Planning Premises

a. Assumptions about the future which form an important basis for

the strategic choices and detailed plans
b. The premises usually concerns external and internal variables expected
to have an impact on the future performance

5. Evaluating Alternatives

a. The consideration of both external and internal factors relating to

the organization’s capabilities and resources
6. Programming

a. Translating of broad plans to specific activities to be undertaken

 b. Usually, structured product lines or industry or market classifications

7. Budget Preparation

a. The translation of programs to financial and other quantitative data

b. Stated in monetary terms after supplemented by non-monetary amounts

c. Example: units sold or produced

Formal Planning Systems in Business Organizations

- The process, participants, outputs, formats, and calendar of the planning

activities are explicitly defined.

General Approaches to Formal Planning

1. Bottom-up Approach

a. Formulation of plan is initiated by various units or divisions of an

organization and then passed upward for aggregation at the
corporate level

b. Example: front liners evaluate work to find potential growth and then
communicating it to the management team for analyzation and
planning for the entire company
2. Top-down Approach

a. Initiative is taken by the upper levels, formulating a unified,

coordinated plan, usually with the advice of lower-level managers
3. Interactive Approach

a. A compromise between the bottom-up and top-down approaches

4. Dual Approach

a. Independently formulated both at the corporate and business levels.

All unit’s form plans to suit their particular situation and these plans
are regularly viewed by corporate management.

Classification & Types of Plans

1. Time or Duration Classification

a. Long-Range Planning
 I. Covers 5 years or more.
II. Covers expansions, development, large issues, development,
and construction.

b. Intermediate-Range Planning

I. Covers 1 year to 5 years.

II. A general guideline derived from an organization’s strategy.
III. Relevant on day-to-day basis for middle and first-line managers

c. Short-Range Planning

I. Covers a period of one year or less.

II. Encompasses the development of operational plans for the
given short period.
2. Function or Use Classification

a. Sales Plan

b. Production Plan

c. Personnel Plan

d. Finance Plan

e. All plans concerning any other major function.

Major Kinds of Planning

1. Strategic Planning

a. Long-range planning focused on the entire business operations.

b. It involves the three level of management:

I. Top Management - formulate corporate objectives.

II. Middle Management - implements general goals of the top-level
management.
III. Lower Management
● Develop relevant objectives and plans on how to attain
them.
● Also predicts external business environment and
implements the corporate mission.
2. Tactical Planning
 a. Short-range planning that emphasizes the current operations of
various parts of the organization
b. Used to outline what the various parts of the organization must do for
the organization to be successful in one year or less into the future
c. A series of tactical plans constitutes a strategic plan.

3. Operational Planning

a. Provides the specifics as to how the strategic plan will be attained.

b. Types of Operational Plan:

I. Single-use Plan
● Developed to carry out a course of action that is not to be
repeated in the future.
● Designed to accomplish specific objectives within a relatively
short period of time such as:
a. Programs - consists of a listing of activities intended to
carry out policies attain the objectives of the organization.
Identifies procedures, determining, and allocating
resources needed for each step in the series.
b. Project - a plan which pertains to a discrete activity unit
which has a specific starting and ending point.
c. Scheduling - provides the answer to the question, and
when things should be completed.
d. Budget - translation of a set of activities into quantitative
figures
e. Forecasting - an attempt to foretell or predict the future
trends, events, or conditions from known facts and
prepare for changes.

II. Standing Plan

● Established set of decisions used by managers to deal with
recurring organizational activities.
● Types of Standing Plan:
a. Policies
I. general statements that guide decision making
II. Defines the boundaries.
III. Example: Customer Policy - return of merchandise
within 24 hours from date of purchase)
b. Rules
I. specific statements of what may or may not be
done.
 II. Provide ways of informing what the boundaries of
behavior are.
III. More limiting than a policy
IV. Example: No ID No Entry

c. Procedures

I. Series of steps that are designed to achieve a high

degree of regularity in a frequently recurring event.
II. On-going Plan
● Used for continuing situations, problem, and
activities which are similar and consistent.
● Example: filing of income tax, hiring of
casuals, and payment of bills

Factors Affecting Planning

1. Conditions

● A manager must be aware of the inadequacies, situations, or conditions of the

business which may point to a desirability of change.

2. Time-Factor

● Managers are given a span of time within which bring out the plans into
implementation.
● Phases include:
I. Plan Formulation
II. Plan Implementation
III. Interval for Each Activity
IV. Revision or Modification

3. Resources available

● There must be enough funds and materials available for the purpose of
putting plans into effect.

4. Skills & Attitude

● A manager must have the ability to properly delegate, inspire, and

communicate with the team. You can either drive people away or bring them
closer to you.

5. Political, Social, and Environmental Conditions

 ● The promotion and protection of the welfare of the people through an
improvement of the social and economic conditions of the community
● Example: Salaries not being enough for an employee creating a negative
impact on performance and quality of work

6. Physical facilities

● Improved science & technology is considered important, and equally

important is the location to avoid problems involving faulty or outdated
equipment and software, nearness to material suppliers, and transportation.

7. Collection & Analysis of Data

● Planning depends for its effectiveness on the quality and quantity of data
involved. It is also important that efforts should be directed towards the
acquisition, organization, and evaluation of data for it to serve its purpose.

Tools in Business Planning and Decision-Making

1. Break Even Analysis

● Used for analyzing the effect on profits of different pricing strategies or
different alternatives in incurring costs.

2. Forecasting Methods
● Develops assumptions about the future that are relevant to the
predicted level of certain planning variables, for example, the
company’s future sales.
3. Linear Programming
● A quantitative tool for determining the optimal combination of resources
and activities.
● It can be used for production scheduling, allocation of personnel or
production to produce an item at minimum costs.
4. Simulation Models
● Mathematical representations of some aspect of a business operation
● Used when the planning variables are so numerous it is difficult to
analytically assess a change in one or more variables involved.
5. Management by Objectives
● Often referred to as a popular management technique in the US back
in the 60s & 70s
● An important tool for planning at the “micro” level
● Also used as a process to achieve goals if cannot conveniently be
expressed in the form of financial target.
● Under MBO, a manager & employee discuss goals for the employee,
the accomplishment being a major factor in the evaluating and
rewarding performances.