Concept of Planning

• Planning is deciding in advance what to do and how to

do. It is one of the basic managerial functions. Before
doing something, the manager must formulate an idea of
how to work on a particular task. Thus, planning is
closely connected with creativity and innovation.
• Manager would first have to set objectives, only then will
a manager know where he has to go. Planning seeks to
bridge the gap between where we are and where we
want to go. Planning is what managers at all levels do. It
requires taking decisions since it involves making a
choice from alternative courses of action.
 Concept of Planning Cont’d
• Planning, thus, involves setting objectives and
developing appropriate courses of action to achieve
these objectives. Objectives provide direction for all
managerial decisions and actions.
• Planning provides a rational approach for achieving
predetermined objectives. All members, therefore, need
to work towards achieving organizational goals.
• Therefore, planning means setting objectives and targets
and formulating an action plan to achieve them. It is
concerned with both ends and means i.e., what is to be
done and how it is to be done.
 Importance of Planning
• Planning provides directions- boundary/limit
• Planning reduces the risks of uncertainty.
• Planning reduces overlapping and wasteful activities.
• Planning promotes innovative ideas.
• Planning facilitates decision making.
• Planning establishes standards for controlling.
 Characteristics of Planning
• Planning focuses on achieving objectives.
• Planning is a primary function of management.
• Planning is pervasive.
• Planning is continuous.
• Planning is futuristic.
• Planning is a mental exercise- innate ability, skills
• Planning involves decision making:
 Objectives
• Objectives are goals or target that the firm
wishes to reach within a started amount of time.
• One firm may wish to increase its return on
investment from 10 to 20 percent in the next two
years.
• Another may seek to increase the market share
from 5 to 15 percent over the course of five
years.
• Setting objectives requires the firm to anticipate
what is likely to happen in the future
 Actions
• Actions are specific steps the firm intends to
take to achieve the desired objectives.
• For instance, return on investment may be
increased by downsizing, decreasing
inventories, using technology to increase
productivity.
• Managers may also decide to increase
advertising expenditures to expand its market
share.
• Alternatively, it may be more efficient to undercut
competitors by decreasing prices.
 Resources
• Planned actions cannot be carried out effectively without
careful resource allocation.
• A quality plan states where resources will come from (for
instance, borrowed versus internally generated fund) and
how they will be deployed.
 Funds
 Manpower (Personnel)
 Technology
 Infrastructure
 Implementation
• Finally, plans must be accompanied by
implementation guidelines that show how
the intended actions will be carried out.
• Implementation involves dividing tasks
among different actors, specifying
reporting relationship, and establishing
timeliness.
 Benefits of Planning
• Assessment of external forces - One of the key
aspects of planning is examining various
environmental factors. This helps the firm deal
with environmental uncertainty and identify both
opportunities and threats present in the
environment. Then, management can mobilize
resources to neutralize potential threat as well as
take advantages of opportunities. (Proactivity)
• Developing a sense of direction and purpose -
A well designed plans helps both managers and
employee to understand what the organization is
trying to achieve as well as the role that each
plays in accomplishing those goals. Without a
plan, managers and employees usually lack a
clear sense of direction leads to conflicting goals,
and the ineffective use of resources.
 Benefits of Planning Cont’d
• Identifying the factors that affect the
organization. Properly conducted
planning helps the organization focus on
factors related to growth, renewal, and
survival.
• Encourage participation. When workers
participate in managerial activities, they
tend to ‘buy in’ and work much harder to
see an effort succeed. The planning
process is an excellent place to encourage
managers and employees to share inputs
about the goals of the organization.
 Benefits of Planning Cont’d
• Coordination of efforts. Managers who operate
independently may not be aware of what other
managers are doing. The planning process may
help them coordinate effort more effectively.
•  Establishment of priorities. Planning can help a firm
prioritize its major problems or issues. Lack of priorities
can dilute the organization’s efforts. Also, failure to define
priorities can cause a firm to drift and prevents it from
developing a clear strategic focus. This was a primary
reason why Pepsi lost the war against Coke during the
1980s. Coke focused it energies on its core product,
while Pepsi’s efforts were dispersed across a variety of
unrelated products such as restaurants, hotels, and retail
outlets. (which of your plans will give you the best
returns)
 Benefits of Planning Cont’d
• Understanding circumstances contributing to
past success or failure. It is vital for managers
to learn from past successes and failures.
Planning can bring the reasons for poor and
good performance into sharper view, enabling
the firm to draw on experience. (bring the past to
bear in your present endeavors)
• Ensuring the availability of adequate
resources. A well-designed plan leads to
identifying the resources needed for the future.
These resources may come from several
sources.
 The Pitfalls of Planning
• Poor forecast of future condition. As you have seen,
the business environment is changing faster than ever.
Even the most sophisticated planning techniques may
not predict accurately what is likely to happen in the
future. The longer the time frame, the more likely that
unforeseen circumstances will occur.
•  Unfavorable Plans imposed from above. The
traditional approach to planning is from the top down,
with the CEO and senior executives, establishing
organizational objectives and laying out general business
strategies. Managers at lower level then devise
implementation methods and operational plans to
support the objectives set at the top. Separating the plan
generators from the plan implementers often leads non-
total commitment from the lower level managers
especially when those plans are not favourable to them.
 The Pitfalls of Planning
• Planning as a self–contained activity.
Managers and employees may be cynical about
objectives and suggestions for action emanating
from specialized planning departments or units
because these units or department were
captivated with the planning process and
divorced themselves from the rest of the
organization.
• Inflexible adherence to objectives and
processes. A firm may become overly
committed to an outdated plan, ignoring clues
that it is time to change direction. People tend to
justify “sunk cost” by continuing to defend
objectives in spite of disappointing results.
 Pitfall of Planning Cont’d
• Planning leads to rigidity.
• Planning may not work in a dynamic
environment:
• Planning reduces creativity
• Planning involves huge costs:
• Planning is a time-consuming process
• Planning does not guarantee success:
 Keys to Successful Planning
• Involving different organizational levels.
Every level of management should be
involved in planning.
• When this is done, both the quality of the
plan and commitment to it are likely to
increase when key managers and
employees at various organizational levels
contribute to it formulation and
implementation.
Keys to Successful Planning Cont’d
• Using both numerical and judgmental
methods. An effective planning process
requires a thorough understanding of
interrelated environmental and organizational
factors.
• Numerical data can be helpful; the numbers
need to be carefully interpreted. There are
situation where numerical approaches are not
suitable. Systematically tapping the knowledge
of employees at different levels in the
organization allows the firm to benefit from their
experiences and to profit from the collective
judgement of company employees.
Keys to Successful Planning Cont’d
• Viewing planning as continuous and
capable of adapting to change. Company
leaders must be flexible enough to respond to
changes in technology, competitors’
reactions, international trends, and industry
conditions if the planning process is to be
successful. Planning a product lunch
• Almost any objective and the steps to
accomplish it are likely to become obsolete
relatively quickly unless there are built-in
mechanisms to consider and respond to
change.
Keys to Successful Planning Cont’d
• Avoiding paralysis of analysis. An obsession
with paperwork, technical reports, statistical
tables, and other supporting documentation
causes paralysis of analysis. The key to
successful planning is action, not becoming
bogged down in overanalyzing every detail.
Dynamism should be incorporated into planning
• Concentrate on a manageable set of issues.
It is important to limit planning to key priority
areas. A good way to identify these keys areas is
to focus on core competence or resources that
enable it to do things better than competitors.
 Formal Planning and Opportunistic
Planning

• A dynamic world require dynamic planning

programs.
• Formal planning, a system designed to
identify objectives and to structure the
major tasks of the organization to
accomplish them.
• All what we have discussed so far is
formal planning. A second type of planning
is opportunistic planning.
 Formal Planning and Opportunistic
Planning Cont’d
• Opportunistic planning is a type of planning
that involves programmatic actions triggered by
unforeseen circumstances; it can coexist with
formal planning and can help the formal plan
function more smoothly.
• Resources that are not totally committed as part
of the formal planning process may be used at
the discretion of managers to deal with
unexpected events.
• It is important to strike a balance between these
two types of planning.
 Formal Planning and Opportunistic
Planning Cont’d

• Organization that rely exclusively on

formal planning can become too rigid,
whereas firms that use only opportunistic
schemes will be constantly reacting to
external forces and will have no clear
sense of direction.
Step- by Step Planning Process
Cont’d
• Setting Objectives: The first and foremost step is setting
objectives. Every organisation must have certain objectives.
Objectives may be set for the entire organisation and each
department or unit within the organisation. Objectives or goals
specify what the organisation wants to achieve. It could mean
an increase in sales by 20% which could be objective of the
entire organisation. How all departments would contribute to
the organizational goals is the plan that is to be drawn up.
Objectives should be stated clearly for all departments, units
and employees.
Step- by Step Planning Process
Cont’d
• Developing Premises: Planning is concerned with the future
which is uncertain and every planner is using conjecture about
what might happen in future. required to make certain
assumptions about the future. These assumptions are called
premises. Assumptions are the base material upon which plans
are to be drawn. The base material may be in the form of
forecasts, existing plans or any past information
Step- by Step Planning Process
Cont’d
• Identifying alternative courses of action: Once
objectives are set, assumptions are made. Then the next
step would be to act upon them. There may be many
ways to act and achieve objectives. All the alternative
courses of action should be identified. The course of
action which may be taken could be either routine or
innovative. An innovative course may be adopted by
involving more people and sharing their ideas.
Step- by Step Planning Process
Cont’d
• Evaluating alternative courses: The next step is to weigh the pros
and cons of each alternative. Each course will have many variables
which have to be weighed against each other. The positive and
negative aspects of each proposal need to be evaluated in the light
of the objective to be achieved. In financial plans, for example, the
risk-return trade-off is very common. The more risky the investment,
the higher the returns it is likely to give.
• Selecting an alternative: This is the real point of decision making.
The best plan has to be adopted and implemented. The ideal plan,
of course, would be the most feasible, profitable and with least
negative consequences. Most plans may not always be subjected to
a mathematical analysis. Sometimes, a combination of plans may
be selected instead of one best course. The manager will have to
apply permutations and combinations and select the best possible
course of action.
Step- by Step Planning Process
Cont’d
• Implementing the plan: This is the step where other managerial
functions also come into the picture. The step is concerned with
putting the plan into action, i.e., doing what is required. For
example, if there is a plan to increase production then more labor,
more machinery will be required. This step would also involve
organizing for labor and purchase of machinery.

• Follow-up action: To see whether plans are being implemented

and activities are performed according to schedule is also part of the
planning process. Monitoring the plans is equally important to
ensure that objectives are achieve
•  
 The Planning Process
• Does it make sense to plan in a world typified by rapid
and dramatic change? The answer is a resounding “yes!”
So then what is planning?
• Planning is a process that helps managers set
objectives for the future and map out the activities that
will make it possible to achieve those objectives.
• There are formal and informal planning processes.
Formal planning involves a formal written statement of
future objectives and the approaches to reach them. The
document can be shared with those responsible for the
execution of the plan to create common understanding.
 The Formal Planning Process
• There are four elements of a formal planning
process: setting objectives, charting course of
action to meet the objectives, allocating
resources to carry out the planned activities, and
implementing the activities. Each of these steps
is discussed in detail below.
Setting Objectives
• Objectives are the performance targets set
during the planning cycle.
• Inappropriate or poorly defined objectives
invalidate the rest of the planning process since
there is no clear guide for organizational efforts.
The Planning Process – Setting Objective
Cont’d
• In general, objectives are more general at the
top and become more specific at lower
organizational levels. Some people refer to this
as cascading objectives.
• The overall objectives of the organization reflect
its mission, which is a statement of the
organization’s reason to exist.
• Specific and measurable objectives motivate
behaviour more than general objectives and
ambiguous ones.
The Planning Process – Setting Objective Cont’d
• Managers should make sure that objectives are
challenging and will stretch employee to work harder
to use their full potential.
• Objectives should specify a timetable or deadline.
This can serve to motivate individuals.
• A timetable can cause individuals to organize tasks,
prompting them to monitor work to ensure that
completion is on time.
• It also helps management evaluate individuals or
units on the extent which work was done in a timely
fashion.
• A firm has many stakeholders, including employees,
shareholders, consumers, and regulatory bodies.
Each may have different objectives.
 The Planning Process – Setting Objective Cont’d
• The planning process should identify the wishes of each of theses
groups and develop objectives that are clear, achievable,
measurable, and prioritized so that they contribute to overall
organizational performance.

• One planning technique that is widely used in setting objectives is

Management by Objectives (MBO). MBO is a program in which
objectives are mutually set between employee and supervisor.

• The employee is held accountable for the accomplishment of those

objectives at various interval which are normally part of annual
performance appraisal.
 The Planning Process – Setting Objective Cont’d
• MBO program are popular because they
combine planning (through participatively set
objectives) and control (employees are
responsible for the attainment of measurable
goals)
• The figure below shows the key steps of typical
annual MBO cycle.
 The Planning Process – Setting
Objective Cont’d
Establish Mutually Agreed Formally Evaluate Extent
Objectives between Employee to Which Objectives
and Supervisor
Were Met or Exceeded
1.
3.

Develop Action Plan to Monitor Progress toward

Accomplish Objectives Achievement of Objectives
(Ongoing)
2.
4.
 The Planning Process – Setting Objective Cont’d
• In step 1, objectives are agreed between the superior
and subordinate.
• In step 2, managers at each level develop action plans
to accomplish the objectives set for them by their
immediate superior in step 1.
• As the plans are implemented in step 3, there are
frequent checkups to ensure that things are on track
and make necessary adjustments.
• In step 4 (which normally takes place a year after
objectives were set in step 1), the pairs of superior and
subordinate who established the mutually agreed-
upon objectives in step 1 meet to discuss the extent to
which objectives were met.
• The feedback usually put in writing in a document
called performance appraisal form.
The Planning Process – Setting Objective Cont’d
• Employees are usually rewarded with cash
bonus, stock, promotion and other suitable
benefits when they accomplish or exceeded
performance target in step 1.
• This performance information is then used as
part of goal setting for the next review cycle.
• Unfortunately, the very strength of MBO –
measurability – often becomes it major
weakness.
• Managers can manipulate the system to choose
easier to reach targets and ignore intangible
things that may be difficult to measure such as
goodwill.
The Planning Process – Setting Objective Cont’d
• They may also become reluctant to change
priorities for fear of not achieving agreed-upon
objectives when situation demands it.
• Worse yet, the setting of numerical objectives
may lead to gaming on the part of managers to
reach or exceed the quantitative targets set in
step 1, tempting them to engage in unethical
behaviours.
• This means that for an MBO system to be
effective in the long run, the system must be
flexible and allow for objective judgement when
assessing whether or not objectives are being
achieved.
The Planning Process-Charting a course of action
• Once objective have been established, the next step in
planning process is to determine the actions
necessary for producing orderly results.
• Three types of actions are normally planned: strategic,
tactical, and operational.
 Strategic action plans
• Top executive are normally responsible. Strategic
action plans are based on overall organization
features, resources, and the environment.
• To be effective, a strategic action plan should meet the
following criteria:
1. Proactivity, which is the degree to which the strategic
action plan takes a long-term view of the future and
actively moves the company forward in desired
position.
 The Planning Process-Charting a course of action

2. Congruency, the extent which the strategic action

plan fits with organizational characteristics and the
external environment.
3. Synergy, the integration of the efforts of various
organizational subunits to better accomplish
corporate-wide business objectives.
Tactical action plans
• Tactical action plans are developed at the division or
department level. They specify the activities that
must be performed, when they must be completed,
and the resources a division or department will need
to complete the portion of strategic action plan
under it purview.
The Planning Process-Charting a course of action
• Two important aspects of tactical action plans
are division of labour and budgeting.
• The production process in which each worker
repeats one step over and over, achieving
greater efficiencies in the use of time and
knowledge; also, the formal assignment of
authority and responsibility to job holders is
called division of labour.
• Budgeting is controlling and allocating the firm’s
funds. This is an integral of tactical action plans
• Budgets are based on forecasts, which in turn
depend on assumptions about the future.
The Planning Process-Charting a course of action

Operational action plan

• Line managers and employees directly
responsible for individual tasks or activities.
• These plans tend to be narrowly focused on
resources, methods, timelines, and quality
control issues for a particular kind of operation.
• In general, the time frame for operational
action plans is shorter than for tactical action
plans.
• The figure below illustrates a typical operation.
 The Planning Process-Charting a
course of action
• ‘

Control

Transformation
Inputs Outcome
Feedback Loop
The Planning Process-Charting a course of action
• Inputs (human, financial, raw materials and
other resources) are transformed (through
assembly) into outcomes (products or
services).
• Control component includes information
about characteristics of inputs and outputs
and how input must be modified to produce
outputs.
• Feedback is returned from outputs to
transformation and input, so that continuing
improvement may be achieved by using
resources more efficiently.
Benefits of operational planning
• The opportunity to use feedback for
continued incremental learning.
• The ability to visualize alternative types of
operations i.e. alternative way to use
resources to create product or service
• The ability to predict the effect of
modifications in operations on the
efficiency of operations.
• The ability to evaluate the effectiveness of
operations.
 The Planning Process - Implementation
• Planning is meaningless unless it can be carried out
successfully.
• Implementation phase is a critical part to planning
process.
• Implementation involves defining tasks to be
accomplished, assigning individual responsibilities
for those tasks, and managing individual to ensure
that the tasks are appropriately completed.
• There are four means of implementation of plans
namely authority, persuasion, policy and
feedback mechanism.
 The Planning Process – Implementation
Cont’d
• Single-use plans are implemented for unusual situations.
A single-use plan is developed for a one-time event or
project. Such a course of action is not likely to be
repeated in future, i.e., they are for non-recurring
situations.
• The duration of this plan may depend upon the type of
the project. It may span a week or a month or a day,
such as, organizing an event or a seminar or conference.
These plans include budgets, programmes and projects.
They consist of details, including the names of
employees who are responsible for doing the work and
contributing to the single-use plan.
• .
 The Planning Process – Implementation Cont’d

• Standing plans regulate situations that occur repeatedly.

That is, they are plans created to help the organization
deal with issues that come up on a regular basis.

 A standing plan is used for activities that occur regularly

over a period of time. It is designed to ensure that
internal operations of an organisation run smoothly. Such
a plan greatly enhances efficiency in routine decision-
making. It is usually developed once but is modified from
time to time to meet business needs as required.
Standing plans include policies, procedures, methods
and rules.
The Planning Process – Implementation Cont’d
• Organizations implement standing plans
using a programmed approach that includes
policies, rules, and standard operating
procedures.
• A policy is a general guide for managers and
employees to follow.
• A rule is a formal, written statement that
states the general permissible bounds for the
application of particular policies.
• A standard operating procedure (SOP)
describes in detail the precise steps to be
followed in a specific situation.