UNIT II

PLANNING
 WHAT IS A PLAN?

A plan is a statement of
intended means to
accomplish a goal.
• Forecasts are predictions - They concern
events and trends over which the
business has little or no control.
• Plan are about what the business intends
to do.
• But forecasts (especially sales forecasts)
are essential in planning.
 DEFINITION
• Planning is deciding in advance what is to be
done; that is a plan is a projected course of
action.
-Newman
Plans have two basic components -
– Goals : an end state (the targets/results that manager
hope to achieve
– Action Statements : means by which an organization goes
ahead to attain its goals.
• Strategic plan sets out the overall
direction for the business in broad scope
• Business plan – the action that a business
will take to compete
• Operational plan
• Details how the overall objectives are to be
achieved
• Specifies what senior management expects
from specific department of functions.
 NATURE OF PLANNING
• It is contribution to objectives :
Since plans are made to attain goals or objectives, every plan and all
its support should contribute to the achievement of the
organization’s purpose and objectives.
• It is primacy among the manager’s tasks:
That planning is the prime managerial function is proved by the fact
that all other functions such as organizing, staffing, leading and
controlling are designed to support the accomplishment of the
enterprise’s objectives.
• It is pervasiveness, and
Planning is a unique and universal function of all managers.
• The efficiency of resulting plans.
Plans should not only be effective, but also efficient. The
effectiveness of a plan relates to the extent to which it accomplishes
the objectives.
 PURPOSE OF PLANNING
• In organizations, planning is a management
process, concerned with defining goals for
company's future direction and determining
on the missions and resources to achieve
those targets. To meet the goals, managers
may develop plans such as a business plan or
a marketing plan. Planning always has a
purpose.
 Cont….
• Clarify direction
• Ensure efficient use of resources
• Provide a way of measuring progress
• Support effective decision making
• Co-ordinate activities
• Allocate responsibility
• Motivate and guide people.
 BENEFITS OF PLANNING
1. Planning gives
– Certainty
– Confidence
– Route map
– Evidence to others of our thoughts
2. Planning helps
– Shape thoughts
– Think through scenarios
– Co-ordinate activities
– Identify SWOT
– Examine risks
– Communicate ideas.
 PLANNING PROCESS
1. Perception of Opportunities
2. Setting Objectives or goals / Establishing
Objectives
3. Considering Planning Premises
4. Identifying alternatives
5. Comparing alternatives in light of goals
6. Choosing an alternative
7. Formulating supporting plan
8. Numberizing plans by making budgets
 TYPES OF PLANS
• Hierarchical Plans:
These plans are drawn at three major hierarchical levels, namely, the
institutional, the managerial and the technical core. The plans in these three
levels are;
– Strategic plan
– Administrative or Intermediate plan
– Operational plan Plans can also be categorized according to frequency or repetitiveness
of use.
• Standing Plans:
Standing plans are drawn to cover issues that managers face repeatedly. Such a
standing plan may be called standard operating procedure (SOP). Generally,
five types of standing plans are used;
– Mission or purpose
– Strategy
– Policies
– Rules
– Procedures
 Cont…….
• Single-use Plans:
Single-use plans are prepared for single or unique situations or
problems and are normally discarded or replaced after one use.
Generally, four types of single-use plans are used. These are;
– Objectives or Goals
– Programs
– Projects
– Budgets
• Contingency Plans:
Contingency plans are made to deal with situations that might crop
up if these assumptions turn out to be wrong. Thus contingency
planning is the development of alternative courses of action to be
taken if events disrupt a planned course of action.
A contingency plan allows management to act immediately if such
unforeseen events as strikes, boycotts, natural disasters or major
economic changes render existing plans inoperable or unsuitable
 OBJECTIVES
• In any organization there are different
objectives and management has to achieve all
objectives in an effective and efficient manner.
These objectives of management can be
classified into three categories:
1. Organizational objectives
2. Social objectives
3. Personal objectives
 ORGANIZATIONAL OBJECTIVES
Management is responsible for setting and achieving
objectives for the organization & utilize human and
material resources to the maximum possible advantage,
i.e., to fulfill the economic objectives of a business.
• Survival: The basic objective survival & to survive, an
organization must earn enough revenues to cover costs.
• Profit: Management has to ensure that the organization
makes a profit for the continued successful operation of
the enterprise.
• Growth: To remain in the industry, management must
exploit fully the growth potential of the organization. There
are many indicators of growth such as sales volume, increase
in the of employee count, the number of products or the increase
in capital investment
 SOCIAL OBJECTIVES
As a part of society, every organisation
whether it is business or non-business, has a
social obligation to fulfill which is to
consistently create economic value for various
constituents of society. This includes:
• Environmental friendly methods of production
• Giving employment opportunities to the
disadvantaged sections of society
• Providing basic amenities like schools and
crèches to employees
 PERSONAL OBJECTIVES
Organization consists of different types of
individual who joins it to satisfy their diverse
needs. The individual may seek to satisfy needs
such as:
• Competitive salaries and perks
• Peer recognition
• personal growth and development
• Management has to reconcile personal goals
with organizational objectives for harmony in
the organization.
MANAGEMENT

BY

OBJECTIVES
 OBJECTIVE SETTING
In an MBO, good goals are SMART goals:

S specific
S
U
M measurable C

WORK A achievable HAVE C

E
R result oriented
S
T time-related S
 MBO
Peter Drucker, (1954, “The Practice of Management”)
• Is a systematic and organized approach that
allows management to focus on achievable
goals and attain the best possible results from
available resources
• Aims to increase individual and organizational
effectiveness by aligning organizational goals
and subordinate objectives
• Clarifies and quantifies objectives to allow for
monitoring, evaluation, and feedback
throughout the hierarchy of objectives
 IN SIMPLE WORDS,
MBO IS…
• MBO emphasises the
importance of objectives as a tool
to be used by managers in
fulfilling their managerial roles
(accomplish their tasks)
• Divide problem into
manageable, “bite-size” chunks
MBO; PLAN VIEW

Vision
 MBO; CROSS SECTION
Vision
Top
Managers
Mission

Middle Tactical Management

by
Managers Plans Objectives

First-Level Operational Standing Single-Use

Managers Plans Plans Plans
 Single-use Plans are developed to achieve
objectives that are not likely to be repeated in the
future. Single-use plans include both programs
and projects.
 Standing Plans are used to provide guidance for
tasks performed repeatedly within the
organization. The primary standing plans are
organizational policies, rules, and procedures.
 Operational Plans are used to identifies specific
results to be accomplished within a given short
term time period. Contain detailed information
used in the lower levels in an organization.
 FEATURES OF MBO
Peter Drucker also stated that:
• For the business to succeed, the
managers and employees must work
towards a common goal
• Managers must identify and agree
targets for achievement with
subordinates
• Managers must negotiate the support
needed to achieve the targets with
subordinates
• Evaluate the objectives over time
 MBO AIM
• Short and long-term planning
• Optymalization of organization structure
• Better work and collaboration quality

Appraisal based on objective results

BONUSES
 MBO PRINCIPLES
1.Cascading of organizational goals and
objectives
2.Specific objectives for each team member
3.Participative decision making
4.Explicit time period
5.Performance evaluation & feedback
CASCADING OF OBJECTIVES
 ADVANTAGES OF MBO
• Improves employee motivation
• Improves communication in the
organisation
• Flags up and highlights training needs
required to achieve objectives
• Improves overall performance and
efficiency
• Attainment of goals can lead to the
satisfaction of Maslow’s higher order
needs
 MASLOW’S NEEDS THEORY
“We each have a hierarchy of needs that ranges
from "lower" to "higher." As lower needs are
fulfilled there is a tendency for other, higher needs
to emerge.” Daniels, 2004

Maslow’s theory maintains that a person does not

feel a higher need until the needs of the current
level have been satisfied. Maslow's basic needs are
as follows:
 MASLOW’S NEEDS THEORY
• Achieve full potential,
Self-
Actualization Fulfillment
• Self-Respect, Self-Esteem,
Esteem
Needs Respected by Others
Social Needs • Affection, Acceptance,
(Love & Belonging) Inclusion
• Protection, Stability, Pain
Safety Avoidance, Routine/Order

Basic Human Needs • Food, Air, Water, Sex,

(Physiological) Clothing
 DISADVANTAGES OF MBO
• May demotivate staff if targets are too high and
unrealistic, also if imposed rather than agreed
• Requires the cooperation of all employees to
succeed
• Can be bureaucratic and time consuming
(meetings, feedback)
• Can encourage short-term rather a more
focused long-term growth
• Objectives may go out of date and can restrict
staff initiative and creativity
• Setting targets for certain specialised
employees may be difficult
 MBO; FRAMEWORK CONCEPT

Supervisor

Jointly plan Individually act Jointly control

• Setting • Performing • Reviewing

and objectives tasks results
• Setting (subordinate) • Discussing
standards • Providing implications
• Choosing support • Renewing MBO
actions (supervisor) cycle

Subordinate
 PHASES OF MBO
1. Top management team studies
system.
2. Team sets up methods of measuring
performance.
3. Goal-setting sessions are held at all
levels of organization.
 STEPS FOR MBO
STEP 1: SET GOALS STEP 2: DEVELOP PLANS
•Corporate Strategic goals
•Departmental goals Action Plans
•Individual goals

Review Progress
&
Take Corrective Action
Appraise
Performance STEP 3: REVIEW PROGRESS
STEP 4: APPRAISE
OVERALL PERFORMANCE
ESSENTIAL STEPS FOR MBO
• Set Goals (The most difficult step)
– What are we trying to accomplish?
• Develop Action Plans
– “What do we need to do to get
there?”
– Groups and individuals
• Review Progress
– “How are we doing?”
– Periodically (How Often?)
– Does plan need to be tweaked?
• Appraise Performance
– Rewards?
 e.g. HOW TO SET CORPORATE
OBJECTIVES
Mission statement To become the leading supplier
of computers in London

Corporate objectives To increase sales in London

by 10% in the next 5 years

e.g. (marketing department) to

Departmental objectives achieve a 10% share of the
computer market in London
within the next 5 years
Individuals and team e.g. to design questionnaires
targets as part of market research
 SOURCES OF MBO FAILURES
1. Lack of top management commitment and
follow through on MBO.
2. Employees’ negative beliefs about
management’s sincerity in its efforts to
include them in the decision-making
process.
STRATEGIES AND ITS TYPES
• The term policy is derived from the Greek word
“Politicia” relating to policy that is citizen and Latin
work “politis” meaning polished, that is to say clear.
• These policies which are generally formulated at top
level helps managers sufficient freedom to make
judgments and helps to achieve the organizational
goals and objectives.
• The term “Policy” is defined by koontz and O ‘Donnel
as “policies are general statements or
understandings which guide mangers thinking in
decision making”.
• They ensure that decisions fall within certain
boundaries. They usually don’t require action but are
intended to guide managers in their commitment to the
decision they ultimately make.
 POLICIES

On the Basis of
On the Basis of On the Basis of On the Basis of On the Basis of
Managerial
Source different Levels Functions Dissemination
Functions

1. Marketing
1. Basic 1. Planning 1. Written policies.
(i) Originated
Policies. policies. statements—
Policy. 2. Production
2. General Explicit
(ii) Appealed 2. Organisation policies. policies
policies. policies
Policy. 3. Finance
3. Departmental 2. Oral
(iii) Implied 3. Motivation dissemination— policies.
Policies and control
Policy. Implicit policies 4. Personnel
(iv) Externally policies. policies.
imposed policy
 DECISION MAKING
• The process of deciding about something
important, especially in a group of people or in
an organization.
• It involves the selection of a course of action
from among two or more possible alternatives in
order to arrive at a solution for a given problem.
• Further, decision making process can be
regarded as check and balance system that keeps
the organisation growing both in vertical and
linear directions.
DECISION MAKING PROCESS
• Defining the problem
• Gathering information and collecting data
• Developing and weighing the options
• Choosing best possible option
• Plan and execute
• Take follow up action
 DECISION MAKING STYLE
• The four styles are,
– Directive style,
– Analytic style,
– Conceptual style, and
– Behavioral style.
• Decision making style propose that people
differ in two dimensions when they
approach decision making.
TYPES OF DECISION MAKING
• Tactical and Strategic Decisions
• Programmed and Non-programmed Decisions
• Basic and Routine Decisions
• Organizational and Personal Decisions
• Off-the-Cuff and Planned Decisions
• Policy and Operating Decisions
• Policy, Administrative and Executive
Decisions
 Cont…
• Programmed and non-programmed decisions
• Routine and strategic decisions
• Tactical (Policy) and operational decisions
• Organisational and personal decisions
• Major and minor decisions
• Individual and group decisions
RATIONAL DECISION MAKING
• Such an information and knowledge based
approach promotes consistent and high
quality decisions, and reduces the risk and
uncertainties associated with decisions. The
rational method infuses the decision-
making process with discipline,
consistency, and logic.
• Rational decision making is a multi-step
process for making choices between
alternatives.
• The process of rational decision making
favors logic, objectivity, and analysis over
subjectivity and insight.
• The word “rational” in this context does
not mean sane or clear-headed as it does in
the colloquial sense.