CC106 : Principles of

Management (POM)
 MODULE : 2

PLANNING
 Planning

 Nature and Purpose of Planning

 Steps involved in Planning

 Objectives, Setting Objectives

 Process of Managing by Objectives

 Strategies, Policies and Planning Premises

 Forecasting

 Decision-Making
 External Exam Questions
(1)Define planning and explain the steps involved in
planning? (7 Marks)
(2)Write a detailed note on process of Managing by
Objectives? (7 Marks)
(3)Explain the Strategies, Policies and Planning
Premises. (7 Marks)

(4)Define ‘Management by Objective’ and give its

features. What are the steps involved in Management
by objective process. (7 Marks)
 External Exam Questions
(5)Discuss the process of decision making? Is decision
making a rational process? (7 Marks)

(6)What is the nature and purpose of planning?

(7 Marks)

(7)Distinguish between Strategy and Policy.(7 Marks)

 What is Planning?

“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”

- Koontz and O’Donnell

Nature/Characteristics/Features of Planning
 Planning is a primary function.
 Planning is goal-oriented. (Contributes to Objectives)
 Planning is an intellectual activity.
 Planning is directed towards efficiency .
 Planning is a continuous process.
 Planning is flexible.
 Planning is all pervasive.
 Planning involves choice of alternatives.
 Planning is a mental exercise.
 Purpose/Needs/Importance/Significance of
Planning
 Planning reduces the risks of uncertainty.

 Planning facilitates decision making.

 Planning encourages innovation and creativity.

 Planning provides direction.

 Planning facilitates control.

 Planning help in Co-ordination.

 Effective utilization of resources.

 Steps in Planning Process
(1) Being aware of Opportunities and Strengths
(2) Establishing Objectives and Goals
(3) Developing Premises
(4) Determining alternative courses
(5) Evaluating alternative courses
(6) Selecting a course
(7) Formulating derivative plans
(8) Quantifying plans by Budgeting
 Types of Plans
 Missions or Purposes
 Objectives or Goals
 Strategies
 Policies
 Procedures
 Rules
 Programs
 Projects
 Budgets
 Objectives
 Objectives means ‘End point of a management
Programme.’
 Objectives are established to guide the efforts of the
company and each of its components.
 Objectives are the ends toward which activity is
aimed.
Hierarchy of Objectives
 Imporatance of Objectives
 Objectives help to define the organization in its
environment.
 Objectives help in coordinating decisions and
decision makers.
 Objectives help in formulating strategies.
 Objectives provide standards for assessing
organizational performance.
 Objectives are more tangible targets than mission
statements.
 Objective help to reflect changes in the environment.
 Areas Needing Objectives
According to Peter Drucker,
(1) Productivity
(2) Profitability
(3) Innovation
(4) Market standing
(5) Physical and Financial resources
(6) Managerial Performance and development
(7) Worker Performance and attitudes
(8) Public and Social Responsibility
 Types of Objectives
There are two types of Objectives:

(1) Nonverifiable Objectives (Qualitative Objectives)

(2) Verifiable Objectives (Quantitative Objectives)

Guidelines for Setting Objectives
 Objectives should be realistic.
 Involve all those employees responsible for carrying
out the objectives.
 All objectives within an organization should support
the overall objectives.
 Objectives should have some reach.
 Objectives should be contemporary as well as
innovative.
 The number of objectives for each manager should
not be too many.
 How to set Objectives
There are two view of Set Objectives:

(1) Traditional View

(2) Modern View (MBO)

 Management By Objectives (MBO)
 Peter Drucker was introduced the concept of
Management By Objectives (MBO) in 1954 in his Book
‘The Practice of Management’.

 Management By Objectives (MBO) is also called as a

‘Appraisal by result’, ‘Planning by objectives’, ‘Goal
Management’, ‘Work planning and review’, ‘Joint target
setting’, etc.
 Management By Objectives
(MBO)
Management by Objectives (MBO) is a comprehensive
managerial system that integrates many key
managerial activities in a systematic manner and is
consciously directed toward the effective and efficient
achievement of organizational and individual
objectives.
Process of Management By Objectives
(MBO)
 Setting Organizational Objectives
 Set each section Objectives
 Fixing Key Result Areas
 Setting subordinates Objectives
 Matching resources with Objectives
 Periodical review meetings
 Performance Appraisal
 Recycling
 Features of Management By
Objectives (MBO)
 MBO integrates the objectives of an organization and
individuals.
 MBO provides a basis for measurement.
 MBO provides coordination of Long-term goals with
short term.
 MBO concern with participation of subordinates in
objective setting.
 Periodical review of performance.
 MBO provides guidelines for appropriate system and
procedures.
 Benefits of MBO
 Clarity of Objectives

 Motivational force

 Better planning

 Better communication and Coordination

 Personnel Satisfaction

 Basis for Organizational Change

 Development of effective control that measure results

and lead to corrective action.
Problems and Limitation of MBO
 Time consuming

 Increase paperwork

 Problems in objective setting

 Inflexibility

 Frustration
 Strategy and Policy
 Strategy is a management game plan for

How to please customers

How to respond to changing Strategy
market conditions is HOW
to . . .
How to outcompete rivals
How to grow the business
How to manage each functional piece of the business
and develop needed organizational capabilities
How to achieve strategic and financial objectives
 Strategy and Policy
 Policy is a general statements or understandings that
guide managers’ thinking in decision making.
 Example: The strategy might be to phone 100 people
everyday to meet the sales target. The policy might be
that I am not allowed to phone them after 9 pm.
 Strategy deals with strategic decisions that govern the
long-term health of an organization. While Policy
deals with routine/daily activities essential for effective
and efficient running of an organization.
 Strategy and Policy
 Strategy is concerned with those organizational

decisions which have not been faced before in same

form. While Policy is a blueprint of the organizational

activities which are repetitive/routine in nature.

 Strategy formulation is basically done by top level

management. While Policy formulation is basically

done by middle level management.

 Strategy and Policy
 Strategy is concerned with both thought and actions.

While policy is concerned mostly with action.

Strategy deals with crucial decisions whose

implementation requires constant attention of top

management. On other hand, once policy decisions

are formulated, these can be delegated and

implemented by others independently.

 Planning Premises

 Planning Premises means the anticipated environment

in which plans are expected to operate.
 Classification of Planning Premises:
(1) External Premises
(2) Internal Premises
(3) Tangible Premises
(4) Intangible Premises
(5)Controllable Premises
(6)Semi Controllable Premises
(7)Uncontrollable Premises
 Forecasting
 Forecasting is a tool used to predict future
environmental happenings that will influence the
operations of an organization.
 Webster defines that, “A forecast is a prediction and
its purpose is to calculate and predict some future
event or condition.”
 Advantages of Forecasting
 Forecasting is the essence of planning.

 Forecasting helps in achieving better coordination by

focussing attention on the future.
 Forecasting helps in ensuring control wherever it is
lacking and thereby improves performance.
 Forecasting helps in identifying the environmental
forces.
 Limitations of Forecasting
 Based on Assumptions

 Time Consuming

 Costly

 Unreliable
 Areas of Forecasting
 Sales
 Competition
Growth Rate
 Technology
 New laws and regulations
 Social change
 Political change
 Economic condition
 Forecasting Techniques Or Methods
 Historical Analogy Method
 Survey Method
 Opinion Poll Method
 Time Series Analysis
 Delphi Method
 Expectation of Consumer
 Regression Analysis
 Sales Person’s Opinion Method
 Input-Output Analysis
 Econometric Models
 Decision-Making
 Decision making is defined as the selection of a
course of action amongst all possible alternatives.
 Decision making is the process of identifying and
selecting a course of action to solve a specific problem.
 Decision-Making Process
 Identification of Problem

 Diagnosing the Problem

 Develop the Alternatives

 Evaluate the Alternatives

 Select the Best Alternative

 Implement the Decision

 Verify the Decision

 Effective Decision
 Effective Decision is one which is action oriented,

goal oriented and provides efficiency in

implementation.

 Effective Decision Making must be rational.

 Qualities of Effective Decision:

(1) Action Orientation

(2) Goal Direction

 Types of Decisions
 Strategic Decision
 Operational Decision
 Programmed Decision
 Non-Programmed Decision
 Simple Decision
 Complex Decision
 Individual Decision
 Group Decision
 Personal Decision
 Organizational Decision