11th edition

Heinz Weinrich
Harold Koontz

Chapter no. 4
Essentials of Planning and
Managing by Objectives

M. Kashif Siddiqui
Planning
• “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”
• nnnnnnnnnnnn
• Where we are Where we want to go!

• * Planning & Controlling are inseparable

1–2
Planning

1–3
Types of Plans
 Missions or Purposes
 Objectives or Goals
 Strategies
 Policies
 Procedures
 Rules
 Programs &
 Budgets

1–4
Types of Plans

• 1- Missions or Purposes

 ‘The basic purpose or function or tasks of an

organization or enterprise or agency or any part of it’

 Synergy means that the whole is greater than its parts

1–5
Types of Plans

• 2- Objectives or Goals

 ‘The end towards which activity is aimed’

• 3- Strategies

 ‘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’

1–6
Types of Plans
• 4- Policies

 ‘General Statements or understandings that guide or channel thinking in

decision making’

 Policies define an area within which a decision is to be made and ensure that the decision
will be consistent with, and contribute to, an objective.
 Examples:
– Promotion policy
– Car loan policy
– Buy 1 get 1 free
– On Rs.10,000 shopping, get a free gift hamper

1–7
Types of Plans
• 5- Procedures

 ‘Plans that establish a required method of handling future activities’

 Guides to action, rather than thinking...

 Examples:
– Promotion policy – level of achievement or # of year of service
– Car loan policy – level of management cadre, job portfolio
– Buy 1 get 1 free – time of purchase (midnight deal) etc.
– On Rs.10,000 shopping, get a free gift hamper – 1 time shopping

1–8
Types of Plans
• 6- Rules

 ‘They spell out specific required actions or non-actions, allowing no discretions’

 In procedures, managers can use their discretions, whereas rules allow no discretion in
their application

 Examples:
– No parking
– Close windows during open Safari
– Stop vehicles at signals

1–9
Types of Plans
• 7- Programs

 ‘A 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’

 Examples:
– 5 year Health Improvement Program by City Govt.
– Yearly Training Program for Management Employees
– One day Sales / Marketing Conference
– Musical Night / Picnic

1–10
Types of Plans

• 8- Budgets

 ‘A statement of expected results expressed in numerical terms’

 Its also called as a ‘Quantified Plan’

– Cash Flows
– Capital / Revenue Expenditure
– Production Units
– Sales Revenue etc.

1–11
Steps in Planning
 Being Aware of Opportunities
 Establishing Objectives
 Developing Premises
 Determining Alternative Courses
 Evaluating Alternative Courses
 Selecting a Course
 Formulating Derivative Plans
 Quantifying Plans by Budgeting

1–12
Steps in Planning

• 1- Being Aware of Opportunities

1–13
Steps in Planning
2- Establishing Objectives

 Overall org. obj. should be well-communicated down the line

 Obj. should be for whole & for each unit
 Obj. should be short-term as well as long-term
 Obj. should be specify expected results

1–14
Steps in Planning
3- Developing Premises (involves Forecasting)

 Premises are Assumptions about the environment in which the plan

is to be carried out
 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
 e.g. market placement, investment outlay, Govt. policies etc.

1–15
Steps in Planning
4- Determining Alternative Courses

 Few but Relevant

 e.g. design/ tech., location, size, price, facilities etc.

1–16
Steps in Planning
5- Evaluating Alternative Courses

 Best suited, applicable, practical in light of Premises & Goal

1–17
Steps in Planning
6- Selecting a Course

 The Real Point of Decision Making

1–18
Steps in Planning
7- Formulating Derivative Plans

1–19
Steps in Planning

8- Quantifying Plans by Budgeting

1–20
Steps in Planning

1–21
Planning

• Coordination of Short-term & Long-term Plans

 No Short-term plan should be made unless they

contribute to the relevant Long-term plan

 Continuous review & revise immediate decisions to

keep them in-line with Long-term plans

 Well-communicated Long-term plan guide managers to

develop in-line Short-term plans

1–22
Objectives

• “Objectives should be VERIFIABLE: when at

the end of the period one can determine
whether or not they have been achieved”

• Clear and verifiable objectives facilitate measurement of

the surplus as well as the effectiveness and efficiency of
the managerial actions

1–23
Nature of Objectives

• Objectives state end results and overall objectives

need to be supported by sub-objectives, thus form
a hierarchy as well as the network

1–24
Objectives & Org. Hierarchy

• 4- Key Result Area – in which performance is essential for

the success of the enterprise 1–25
Objectives & Org. Hierarchy
A FOOD RESTURANT IN KARACHI

1 – To provide quality food to the local market

2 – High Quality food with comfortable & relaxing
ambiance for upper income segment of Karachi
3 – Location, branches, interior designing
4 – Sales volumes, profitability, market share, ROI
5 – Marketing, Finance, Operations…
- Marketing : Branding, Sales Promos
- Finance : Cash Flows, Investments, Taxation
- Operations : Logistics, Purchases
1–26
Nature of Objective

 Two Approaches for Objective Settings:

 Top Down Approach
 Bottom Up Approach

 Multiplicity of Objectives

1–27
How to Set Objectives

 Qualitative & Quantitative Objectives

 Verifiable
 Reasonable

(Please refer Table 4-1, page 112)

 Guidelines for Setting Objectives

(Please refer Table 4-2, page 113)

1–28
Management By Objectives (MBO)
• “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”
• MBO
• - Goal-oriented Management
• - Way of Managing, not an addition to the Managerial job

1–29
Systems Approach to MBO

1–30
Management By Objectives (MBO)

• Key Benefits

 Improvement of managing through result-oriented

planning
 Clarification of org. roles, structure, delegation of
authority
 Commitment to personal and org. objectives
 Development of effective controls that measure results
and lead to corrective actions

1–31
Management By Objectives (MBO)

• Weaknesses

 Understanding the MBO approach (what it is? How it

works? Why it is being done?)
 Difficulty in setting verifiable goals with right degree of
flexibility
 Economic conditions
 Unethical behaviors
 Short-term instead of long-term
 Use of ‘numbers’ where not applicable

1–32