LESSON 4: PLANNING 1

DEFINITION

Planning
- Involves selecting missions and objectives as well as
the actions to achieve them, which requires decision
making that is, choosing a course of action from
among alternatives.
DEFINITION

Planning
 Planning is choosing a goal and developing a method of
strategy to achieve that goal.
 Planning bridges the gap from where we are to where we
want to go.
 Planning helps management pull the individual to
achieve common goals by provision of well-defined
objectives.
DEFINITION

Benefits of Planning
Provide Direction: Planning reduce uncertainty by
look ahead to anticipate changes.
DEFINITION

Benefits of Planning
Reduce Uncertainty: Planning reduce uncertainty by
look ahead to anticipate changes.
• Manager can estimate their consider impact of
changes and then they can develop response to these
changes.
DEFINITION

Benefits of Planning
Minimizes waste and redundancy: When work
activities are coordinated around established plans
redundancy can be minimized.
Provide ability in controlling: Planning helps in
controlling and monitoring the work that either this
works is on its right path or not.
TYPES OF PLAN

A. Mission or Purpose
The basic purpose or function or tasks of an enterprise
or agency or any parts of it.
 Inevery social system, enterprises have a basic
function or task assigned to them by society.
 Synergy means that the whole is greater than its
parts.
TYPES OF PLAN

B. Objectives and goals

Objectives, or goals are the ends toward which activity is
aimed.
 They represent not only the end point of planning, but
also the end toward which organizing, staffing, leading,
and controlling are aimed.
 Short term goals are a means to achieve long term goals.
TYPES OF PLAN

B. Objectives and goals

Objectives, or goals are the ends toward which
activity is aimed.
 VerifiableObjectives means at the end of the period
it should be possible to determine whether or not
objective has been achieved.
TYPES OF PLAN

C. Strategies
Strategy is the determination of the basic long-term
objectives of an enterprise and the adoption of courses
of action and allocation of resources necessary to
achieve these goals.
TYPES OF PLAN

D. Policies
Policies are general statements or understandings that
guide or channel thinking in decision making. Policies
are, at times, expressions of the company culture and
practices that involved over time.
TYPES OF PLAN

D. Policies
Examples of Policies are:
• Customer policy: Merchandise can be returned by
customers within one week from the date of purchase.
• Personnel policy: Promote from within starting a specific
level.
o Newhires should not be first-degree relatives of present
employees.
TYPES OF PLAN

D. Policies
Examples of Policies are:
• Pricing policy: Fixed-price policy
• Minimum Cash balance: All funds in excess of a specified
minimum cash balance should be invested in marketable
securities.
Policies are usually contained in memos or, more
frequently, in company manuals.
TYPES OF PLAN

E. Procedures
Procedures are Plans that establish a required method
of handling future activities.
Procedures are guides to action, rather than to
thinking, and they detail the exact manner in which
certain activities must be accomplished.
TYPES OF PLAN

F. Rules
• Rules spell out specific required actions or non-
actions, allowing no discretion.
 Rules are usually the simplest type of plan.
 Rules are different from policies. While policies
are meant to guide decision making by marking off
areas in which managers can use their discretion,
rules allow no discretion in their application.
TYPES OF PLAN

F. Rules
Example of rules:
• Customer’s Refund: No refund will be given for
returned merchandise if, invoice is not returned by
the customer.
• Uniform Rule: Employees not in uniform will not
be allowed to render service during the day.
TYPES OF PLAN

F. Rules
Example of rules:
• Gate pass: Equipment brought out of company
premises must be accompanied by a gate pass.
TYPES OF PLAN

G. Programs
Programs are complex of goals, policies, procedures,
rules, task assignments, steps to be taken, resources to
be employed, and other elements necessary to carry
out a given course of action.
 Programs are ordinarily supported by budgets.
TYPES OF PLAN

G. Programs
• Budgets
Budget is a statement of expected results expressed in
numerical terms.
 Budget may be called a “quantified” plan. In fact
the financial operating budget is often called a
Profit plan.
STEPS IN PLANNING

Figure 4.1 – Steps in Planning

The practical steps listed below, and diagrammed in
Figure 4.1, are of general application. In practice,
however, one most study the feasibility of possible
courses of action at each stage.
STEPS IN PLANNING

Figure 4.1 – Steps in Planning

The practical steps listed below, the diagrammed in
Figure 4.1, are of general application. In practice,
however, one must study the feasibility of possible
courses of action at each stage.
STEPS IN PLANNING

Figure 4.1 – Steps in Planning

1. Being aware of opportunities:
This activity involves collecting and analysing
relevant external information which define
opportunities or threat to the firm’s business.
STEPS IN PLANNING

Figure 4.1 – Steps in Planning

1. Being aware of opportunities:
Include the following:
• Time market
• Competition
• What customers want
• Our strengths
• Our weaknesses
STEPS IN PLANNING

Figure 4.1 – Steps in Planning

2. Establishing objectives
The second step in planning is to establish objectives
for the entire enterprise and then for each subordinate
work unit.
• Determine where we want to be and what we want
to accomplish and when
STEPS IN PLANNING

Figure 4.1 – Steps in Planning

3. Developing Premises
By considering planning premises: In what
environment (internal or external) – will our plan
operate?
Premises: Assumptions about the environment in
which the plan is to be carried out.
STEPS IN PLANNING

Figure 4.1 – Steps in Planning

3. Developing Premises
Principle of Planning premises: the more thoroughly
individuals charged with planning understand and
agree to utilize consistent planning premises, the more
coordinated enterprise planning will be.
STEPS IN PLANNING

Planning Premises
External Variables:
- The rate of growth of the economy and/or the
industry
- The rate of inflation and its expected impact costs
and prices
STEPS IN PLANNING

Planning Premises
External Variables:
- The continuance or discontinuance of certain
government policies which have a favourable or
unfavourable impact on the operations of the firm
(i.e., high interest rates).
- The expected market strategies of key competitors.
STEPS IN PLANNING

Planning Premises
Internal Variables
- The level of internally generated funds to support
investments
- The level of labor productivity in the company’s
factories
- The company’s total staffing level.
STEPS IN PLANNING

Planning Premises
Internal Variables
- The continuance of certain operating policies (i.e.,
rate if dividend, choice of production technology,
supply source, etc.)
STEPS IN PLANNING

4. Determining alternative courses

The fourth step in planning is to search for and
examine alternative courses of action, especially those
not immediately apparent. There is seldom a plan for
which reasonable alternatives do not exist, and quite
often an alternative that is not obvious proves to be
the best.
STEPS IN PLANNING

5. Evaluating alternative courses

After seeking out alternative courses and examining
their strong and weak points, the next step is to
evaluate alternatives by weighing them in light of
premises and goals. One course may appear to be the
most profitable but may require a large cash outlay and
have a slow payback; another may look less profitable
but may involve less risk; still another may better suit
the company’s long-range objectives.
STEPS IN PLANNING

6. Selecting a course
This is the point at which the plan is adopted – the
real point of decision making. An analysis and
evaluation of alternative courses will disclose that two
or more are advisable, and the manager may decide to
follow several courses rather than the one best course.
STEPS IN PLANNING

7. Formulating derivative plans

When a decision is made, planning is seldom
complete, and a seventh step is indicated. Derivative
plans are almost invariably required to support the
basic plan.
STEPS IN PLANNING

8. Quantifying plans by budgeting

After decision are made and plans are set, the final
step in giving them meaning, as was indicated in the
discussion on types of plans, is to quantify them by
converting them into budgets.
STEPS IN PLANNING

8. Quantifying plans by budgeting

The overall budget of an enterprise represents the sum
total of income and expenses, with resultant profit or
surplus, and the budgets of major balance sheet items
such as cash and capital expenditures.
STEPS IN PLANNING

8. Quantifying plans by budgeting

Each department or program of a business or some
other enterprise can have its own budgets, usually of
expenses and capital expenditures, which tie into the
overall budget.
STEPS IN PLANNING

Figure 4.2
Planning activity and the responsibility for planning at
different levels in the firm. The scope or coverage of
the plans, i.e., whether it covers to the whole firm, a
department or other subunit, or just one individual,
generally depends on the level in the organization at
which the planning occurs.
STEPS IN PLANNING

Figure 4.2
At the top management levels, plan generally covers
the whole firm. At the middle or sub-unit levels, the
plans may cover only particular sections or
departments.
STEPS IN PLANNING

Corporate Planning
• Corporate Planning denotes planning activities at the
top level and cover the entire organizational
activities.
• Determine the long-term objectives.
STEPS IN PLANNING

Corporate Planning
• Generate plans to achieve the objectives bearing in
mind the probable changes in environment.
STEPS IN PLANNING

Corporate Planning
• Corporate planning includes:
 The setting of objectives
 Organizing the work, people, and systems to
enable those objectives to be attained.
 Motivating through the planning process of the
plan and developing
STEPS IN PLANNING

Functional Planning
• Functional planning is segmental and it is
undertaken for each major function of the
organization like:
 Production /operation,
 Marketing, finance,
 Human resource / personnel etc.
STEPS IN PLANNING

Functional Planning
• At the second level, functional planning is
undertaking for sub-functions within each major
function.
STEPS IN PLANNING

Strategic Planning
• Deciding on objectives of the organization,
• Deciding on changes on these objectives;
• Deciding on the resources used to attain these
objectives;
• Policies that manage the acquisition, use and
disposition of these resources.
STEPS IN PLANNING

Operational Planning
• Deciding the most effective use of the resources
already allocated
• To develop a control mechanism to assure effective
implementation of the actions.
STEPS IN PLANNING

Long-term Planning
• Long-term plans usually cover all the functional
areas of the business and are affected within the
existing and long-term framework of economic,
social, and technological factors.
STEPS IN PLANNING

Long-term Planning
• Analysis of environmental factors, particularly with
respect to how the organization relates to its
competition and environment.
STEPS IN PLANNING

Short-term Planning
• These plan are aimed at sustaining organization in its
production and distribution of current products or
services to the existing markets.
STEPS IN PLANNING

Proactive and reactive Planning

• Proactive planning involves designing suitable
courses of action in hope of likely changes in the
relevant environment.
• Reactive planning are organizations responses come
after the environmental changes have taken place.
STEPS IN PLANNING

Formal and Informal Planning

• Formal planning is the form of well-structured
process involving different steps.
• Informal planning process is based on managers
memory of events, perception, and got feeling rather
than based on systematic evaluation of
environmental happenings.
1. Planning is choosing a goal and developing a
method of strategy to achieve that goal.
Answer: True
2. To be effective, an organization must have clearly
defined sets of goals and objectives.
Answer: False
3. Defining goals and setting objectives is part of the
organizing function of management.
Answer: False
4. Planning helps management pull the individual to
achieve common goals by
Answer: Provision of well-defined objectives
5. Planning is ______ and ______ function of
management.
Answer: First and foremost
6. Middle managers set goals and objectives and make
decisions about the direction of the organization that
affect everyone in the organization.
Answer: False
7. They are the ends toward which activity is aimed
Answer: Objectives
8. The basic purpose or function or tasks of an
enterprise or agency or any part of it.
Answer: Mission
9. _____develop and carry out tactical plans.
Answer: Management by objectives
10. ____ bridges the gap from where we are to where
we want to go.
Answer: Planning
11. It means at the end of the period it should be
possible to determine whether or not objective has
been achieved.
Answer: Verifiable objectives
12. They are usually the simplest type of plan.
Answer: Rules
13. They are a complex set of goals, policies,
procedures, rules, task assignments, steps to be taken,
resources to be employed, and other elements
necessary to carry out a given course of action.
Answer: Programs
14. In Setting goals the "S.M.A.R.T" stands for:
Answer: Specific, Measurable, Attainable, Realistic,
Timely
15. It is choosing a goal and developing a method of
strategy to achieve that goal.
Answer: Planning
16. It is the continuous planning, monitoring, analysis
and assessment of all that is necessary for an
organization to meet its goals and objectives.
Answer: Strategic management
17. It is the determination of the basic long-term
objectives of an enterprise and the adoption of courses
of action and allocation of resources necessary to
achieve these goals.
Answer: Strategies
18. They are general statements or understandings that
guide or channel thinking in decision making.
Answer: Policies
19. These permit managers to delegate authority and
maintain control over what their subordinates do.
Answer: Policies
20. It means that the whole is greater than its parts.
Answer: Synergy