Planning

Definitions

Characteristics and significance

Orientations to planning, Goals – benefits and kinds of goals,

Types/ Classification of planning

MBO

SWOT analysis

Basics of decision making

Basics of forecasting
What is planning?

• Thinking of future in advance

• Setting goals for the future
• What is to be done, when is to be done and by whom it is to be done
• Setting of objectives to be achieved in future
• A bridge from present to future
• The first step of management
• Making strategies for accomplishment of goals
• A plan is a blueprint for the future
Definitions of Planning

• Planning is deciding in advance what to do, how to do, when to do it and who is to do it.”
—Koontz and O’Donnell
• Planning is the act of determining the organization’s goals and the means for achieving
them.” —Richard L. Daft and Dorothy Marcic
Characteristics of Planning

• Continuous activity
• Dynamic function
• All pervasive
• Future oriented
• Choice based decision making activity
• Goal driven activity
• Intellectual exercise
• Complex and challenging activity
• Process with multiple stages
Why plan?

• Improved performance
• Proactive approach
• Future focused management
• Better coordination
• Basis for control
• Enhanced employee communication and involvement
• Objectivity in decision making
• Cost-effectiveness
• Reduces risk
Orientations to Planning

Orientation to planning is based on the beliefs and philosophy of an organization

• Reactivism
• Inactivism
• Preactivism
• Interactivism
Orientations

Reactivism Inactivism Preactivism Interactivism

• Return organization to • Avoid changes • Accelerate change • Technology, experience and
previous state • Maintain status quo • Mastering technologies to experiments are pivotal
• Preserve traditions • Bureaucratic approach to exploit opportunities • Facilitate development,
• Importance to short term planning • Importance to long term learning and adaptation
tactical planning planning
Goals

Mission statements form the basis for finalizing the goals and objectives of an organization.
They offer broad guidelines to the managers when they determine priorities, make decisions
and allocate resources.

• Describe an organization’s reasons for existence

• Provides a separate identity
• Sets an organization apart from its competitors
Mission statements
Objectives vs goals

• Objectives and goals are used interchangeably in management

• However, time span and specificity are the two factors that distinguish objectives from
goals
• Objectives are derived from goals which are derived from mission statements
• Objectives are more specific as compared with goals
• Objectives follow a shorter time span as compared with goals
Objectives - example

• Objectives are steps to reaching the goal and must be

Objectives of SAIL
related to specific task or process
• Must be time limited and measurable
• Multiple objectives together make up a goal
Types of goals

• Organizational goals can be classified as financial goals and strategic goals.

• Financial goals pertain to the financial performance of an organization.
• Strategic goals are linked to all other aspects of an organizational performance.
• For e.g., fixation of profit target is a financial plan while determination of the number of
units to be produced can be a strategic plan.
Types of Plans

An organizational plan can take different forms depending on its scope, time frame, degree
of detail and frequency of use involved
• Strategic plans
• Tactical plans
• Operational plans
Strategic plans

• Set the long term direction of the organization in which it wants to proceed in the future
• Focus on the broad future of the organization
• Incorporate both external information gathered by analyzing the organization’s
competitive environment as well as its internal resources
• Focus on building competitive advantage
• Usually have a time period of 3-5 years
• Made by top management
Tactical plans

• Translate strategic plans into specific goals for specific functional departments in the
organization
• Typically relate to a single business within an organization
• Usually made for 1-2 years
• They are independent of other tactical plans but complement the strategic plan
• Made by middle management
Operational plans

• Translate tactical plans into specific goals and actions for small units of an organization
• Short term in nature: up to 12 months
• Made by department managers and other lower management
• Least complex
Levels of Planning: Corporate

• Corporate level comprises the senior executives usually located at the headquarters
• What industries should we get into?
• What markets should the firm be in?
• In which business should the corporation invest money?
• What resources should be allocated in each business?
Levels of Planning: Business

• Business managers comprise business and corporate managers

• Who are our direct competitors?
• What are their strengths and weaknesses?
• What are our strengths and weaknesses?
• What advantages do we have over our competitors?
Levels of Planning: Functional

• Functional level managers comprise functional heads – e.g. product managers,

geographic managers
• They are responsible for ensuring efficient and effective operations within their function.
• What activity does my unit need to perform well in order to meet the desired goals?
• What information about competitors does my unit need in order to help the business
compete effectively?
Barriers to effective planning

1. Unsuitability of goals – goals which are difficult to measure or be verified. E.g. job satisfaction
2. Dynamic environment
3. Fear of failure – often discourages managers from undertaking extensive planning
4. Resistance to changes – by employees
5. Inadequate resources – in non-availability of resources, managers may need to curtail their planning
6. Lack of effective communication – leads to poor implementation of plans
7. Absence of creative thinking – required for developing new ideas, products, processes and technology
Barriers to effective planning

8. Managers’ indifference – preoccupation with routine work

9. Lack of follow ups – feedbacks in the planning system help managers to know why and
how a plan works
10. Informal and casual planning – short term plans to tackle emerging situations may
compromise long term goals
11. Expensive exercise - in terms of money and time
Management by Objectives (MBO)

• The term was first outlined by management guru Peter Drucker in his 1954 book, The
Practice of Management
• Management by objectives is a formal set or procedures that establishes and reviews
progress toward common goals for managers and subordinates.
—James Stoner.
Features of MBO
1. MBO is a system or process designed for supervisory managers who directly deal with employees.

2. It places relatively more emphasis on goal formulation (what should be accomplished) than goal execution (how it is to be accomplished).

3. In MBO, discussions and agreements are inherent features of the goal setting and planning process. In traditional planning, goals are passed down
from the managerial levels to lower levels and the employees are directed to accomplish those goals.

4. Managers and subordinates jointly set specific goals that are to be accomplished within a specific time frame.

5. Subordinates are held directly responsible for the goal outcomes.

6. Goal progress reviews and revaluation meetings between superiors and subordinates are essential for MBO.

7. Mutually-agreed objectives act as yardsticks or standards on which the performance of subordinates is evaluated.

8. In MBO, goal accomplishment becomes the sole basis for assessing and rewarding subordinates.
SWOT analysis

Strengths
May come from its resources, people, products, potentials, capacities, practices,
programmes, past successes, etc. In this, the strength of people may include the unique
knowledge, skills and abilities of the employees that provide competitive advantage to an
organization. Unique management styles, large size and good public image of an
organization, effective training and development programmes for employees, strong
customer loyalty, well-built capital base and best compensation policies are a few examples
of strengths of the organization.
SWOT analysis

Weaknesses
Internal factors that cause obstacles to the growth of an organization are its weaknesses. The
same factors that constitute the strengths of one organization can be the weaknesses of
another organization. Resource constraints, uncooperative attitude of employees, high
absenteeism and labour turnover, poor competitiveness, absence of employee training, lack
of effective control and outmoded practices are some of the general weaknesses of
organizations.
SWOT analysis

Opportunities
They may include positive situations and factors related to the business of the organization
but remain outside its control. Organizations usually seek to benefit from these
opportunities by formulating new goals or modifying the existing goals. New government
policies, new markets, exit of competitors, availability of new technology, change in interest
rates and change in population characteristics are some of the external opportunities
available to organizations.
SWOT analysis

Threats
Threats are the developments in the external environment that can directly and negatively
affect the business interest of organizations. Organizations normally have little or no control
over these developments that may pose danger to their survival or growth. Adoption of new
business strategy by the competitors, political uncertainty, entry of overseas competitors,
“exchange rate fluctuation, economic slowdown and negative publicity about a company
and/or its products are some of the threats that can have an impact on the organization.
Decision making

Decision making is the process of identifying and selecting a course of action to solve a
specific problem.
—James Stoner.
Types of decision making environments:
Under certainty
• When the information available for decision making is adequate and perfect for accurate prediction,
then the environment can be described as certainty. In such an environment, managers can identify and
evaluate each alternative solution to a problem properly and also predict their outcomes accurately.

• For instance, when the purchase manager has all the details of different vendors and their products’
price, performance, features and other necessary information, then he/she can make a decision (i.e.
choosing a vendor for supplying the raw material) by being fully aware of the outcome of the decision.
Types of decision making environments:
Under risk
• Only the probability of a specific outcome can be measured
• Based on their knowledge, experience, judgmental skills, together with adequate
information, managers can predict the chances of a desired outcome.
• For example, when the HR manager knows out of past experience and records that a
specific number of employees would leave the organization in a normal year, he (or) she
can then determine the probable vacancies and workforce requirements for that year.
Types of decision making environments:
Under uncertainty
• Managers can predict neither the outcomes nor the probability of outcomes of their
decisions. When managers face restricted access to internal information or deal with
uncontrollable external factors, then the decision environment becomes uncertain.
• When the marketing manager decides on discount offers for the product, the response of
the competitors and customers to such offers may not be known to him.