Management Chapter 4

Management Chapter 4 3/15/2014
PLANNING
Essentials of Planning
Chapter &
Managing by Objectives
4
Five Managerial Functions
Leading
Planning Controlling
Management
Functions
Organizing Staffing
Five Managerial Functions
Leading
Planning Controlling
Management
Functions
Organizing Staffing
1
PLANNING
Selecting missions and objectives as
well as the actions to achieve them,
which require decision making.
Expanded Planning Definition
Selecting missions and objectives as

well as the actions to achieve them,
which require decision making.
that is , choosing a course of

action amongst all alternatives.
Purposes of Planning …?
Why should we do it …?
2
Why Do Managers Plan?

• Purposes of Planning
– Provides direction
– Reduces uncertainty
– Minimizes waste and redundancy
– Sets the standards for controlling
Nature of Planning
Organizing
• Most important
function
Controlling Planning Leading
• Central role:
• Links all other
functions
Staffing
Relationship of Planning & Controlling
• Planning and Controlling are inseparable

– (The Siamese Twins of Management)
• Plans provide the standards of Control
• Controlling without referring to plans is
meaningless
No way for people to tell whether or not they

are going where they want to go (the task of
Controlling) unless they first know where
they want to go (the task of Planning)
3
Planning & Controlling
No
Controlling deviations
Planning Implementation Comparing with from
Plans
Plans
Deviations
Corrective
Action
Relationship of Managerial & Planning Levels
Levels of Planning
Strategic planning:
determining how to pursue long-term goals with
available resources.
Intermediate planning:
determining sub-units’ contribution with allocated
resources
Operational planning:
determining how to accomplish specific tasks
with available resources.
4
Lets go back ….. !
Do you think the long term planning (Strategic

Planning) has to do something with Stability
in Environment
…?
System in Operational Approach
ENVIRONMENT
Transformation
input output
process
Feedback (Reenergizing the system)
System Boundary
Organization as a System receives Input, transforms it

through a Process for Output and Operates in an
Environment (economic, social, regulatory & other forces)
Organisation & External Environment
Technological
Economic
Ecological Organisation Ethical
Political &
Social
Legal
5
Industry in Pakistan….. !
Finding it very hard to carry out

Planning Process ….!
Types of Plans
Types of Plans
1. Missions/ Purposes
2. Objectives/ Goals
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
6
Types of Plans
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
Types of Plans
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
Types of Plans
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
7
Types of Plans
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
Types of Plans
3. Strategies
4. Policies
5. Procedures
6. Rules
7. Programs
8. Budgets
Mission
The basic purpose or function of an
enterprise or agency or any part of it.
8
Guidelines for Mission

• A clear, formally written, and publicized
statement that guides the organization by:
– defining the organization for key
stakeholders.
– outlining how the vision will be accomplished
– establishing key priorities
– stating a common goal and foster
togetherness
– generating enthusiasm and a “can do”
attitude
– empowering organization members.
Example of Mission
Mobilink's Vision:
"To be the leading telecommunication
services Provider in Pakistan by offering
innovative Communication solutions for
our Customers while exceeding
Shareholder value & employee
expectations".
http://www.mobilinkgsm.com/about/vision.php
Example of Mission
Telenor Vision:
“ Our vision is simple: We're here to help
We exist to help our customers get the full
benefit of communications services in their
daily lives.
The key to achieving this vision is a mindset
where every one of us works together: Making it
easy to buy and use our services. Delivering on
our promises. Being respectful of differences.
Inspiring people to find new ways.”
http://www.telenor.com.pk/about/vision.php
9
Example of Mission
Ufone Mission:
“To be the best cellular option for U”.
http://www.ufone.com/about_MissionStatement.aspx
Objective
The end towards which activity is

aimed.
Strategy
The determination of the basic long term objectives of
an enterprise and the adoption of course of action and
allocation of resources required to achieve these goals.
10
Policies
General statements
or understandings
that guide or
channelize thinking
in decision making.
Procedures
Plans that establish a required method
of handling activities.
Rules
Rules spell out specific required actions
or non-actions allowing no discretion.
Do’s Dont’s
11
Programs
A Complex of:
– Goals, policies, procedures, rules,

tasks, assignments, to be taken,
– Resources to be employed, &
– Other elements necessary to carry

out a given course of action.
Budget
A statement of
expected results
expressed in
numerical terms.
Steps in Planning
12
Steps in Planning
1. Awareness of Opportunities
2. Establishing Objectives
3. Developing Premises
4. Determining Alternative Courses
5. Comparing alternatives
6. Selecting Best Course
7. Formulating Supportive Plans
8. Quantifying Plans by Making Budgets
Steps in Planning
4. Determining Alternative
Courses
8. Quantifying Plans by Making
Budgets
Awareness of Opportunities
• A real starting point
• Look at possible opportunities in the light of:

– Strengths
– Weaknesses
• Must also look at future environment both external

and internal.
• Setting realistic objectives depends on this

awareness.
Market, Competition, Customers - Environment
13
SWOT Analysis
STRENGTHS
Activities an organization does well or resources it
control
WEAKNESSES
Activities an organization does not do well or
resources it needs but does not have
OPPORTUNITIES
Positive external environmental factors
THREATS
Negative external environmental Factors
Strengths & Weaknesses

• Strengths and Weaknesses: Internal
• Relate to :
– resources, programs and organization
• Key areas:
– Sales - marketing - distribution - promotion - support;
– Management - systems - expertise - resources;
– Operations - efficiency - capacity - processes;
– Products - services - quality - pricing - features - range -
competitiveness;
– Finances - resources - performance;
– R&D - effort - direction - resources;
– Costs - productivity - purchasing;
– Systems - organization - structures.
Threats & Opportunities

• Relate to external
• Following areas:
• The marketplace which may be altering due to:
– Economic or social factors
– Customers; distribution channels;
– Political & environmental factors
• Competition: creating new threats or opportunities
– Identities, performances, market shares, likely plans,
aggressiveness, strengths & weaknesses
• New technologies: Causing fundamental changes in
products, processes, etc.
– Substitute products, alternative solutions, shifting channels,
cost savings etc.
14
Steps in Planning
Courses
Budgets
Establishing Objectives
• Selecting objectives for:
– Entire organization & each subordinate work unit
– Long Term/ Short term
• Specifying expected results & indicate end points
Organizational objectives give direction to the

major plans, which define objectives for every
major department and so on …. !
Steps in Planning
Courses
Budgets
15
Planning Premises
Assumptions about the environment in
which plans are to be carried out.
Developing Premises
• All Managers MUST agree to these
assumptions
• Assumptions regarding:
– Forecasts
– Basic Policies
– Existing Plans
– Anticipated Environment
Principle of Planning Premises

The more thoroughly individuals, charged with
planning, understand and agree to utilize
consistent planning premises the more
coordinated and realistic planning will be.
What kinds of Markets? Which Technology?

Volume of sales? Bank Loans? Wages rate?
Tax rates? Policies? Plans? New Plants?
Raw Material? Dividend policy? Expansion
Plan? Long term needs? Debt servicing? …..
etc…
16
Steps in Planning
Courses
Budgets
Determining Alternative Courses
• Alternatives exists for almost all Plans

• Problem is not to find alternatives but reducing their
numbers to minimum for analysis and evaluation.
• Preliminary examination to discover most fruitful
possibilities
Steps in Planning
Courses
Budgets
17
Evaluating Alternative Courses

• Evaluate courses by examining their strong
and weak point
• Weigh them in the light of premises and
objectives
• Complex courses can be evaluated with the
help of operational research, mathematical
and computing techniques
Steps in Planning
Courses
Budgets
Selecting the Best Course
Real Decision Making
– By establishing Criteria, e.g.:
• Achieving objectives at least cost
• Requiring least changes
• Max RoI (Return on Investment)
…etc !
– Backup/ Contingency Plan
18
Steps in Planning
Courses
Budgets
Formulating Derivative Plans
After Decision making:
• Planning is not complete
• Needs Supportive Plans for Basic
Plan
Steps in Planning
Courses
Budgets
19
Quantifying Plans by Budgeting

After Decision making and Plans setting:
• Final Step – Giving meaning to plans
• Quantify by converting into Budgets
• Sum Total of Income & Expenses
• Balance Sheets – Cash Flow Statements
• Profit/ Loss Statements etc ….
Objectives
Management by Objectives
Management by Objectives (MBO)
• Peter Drucker
– A famous Management Consultant
– Author of 39 Books
– MBO Approach given in 1954
• Management by Objectives (MBO)
– A comprehensive management system based on
measurable participatively set objectives, that
leverages the motivational power of objectives
– World wide used by many organizations
20
7–61 © 2005 Prentice Hall

Inc. All rights reserved.
Management by Objectives
Management by Objectives (MBO)
• A program that encompasses specific goals,
collectively set, for an explicit time period, with
feedback on goal progress.
Key Elements
1. Goal specificity
2. Participative decision making
3. An explicit time period
4. Performance feedback

Cascading of Objectives
Overall
organizational
objectives
Divisional
objectives
Departmental
objectives
Individual
objectives

21
Cascading of Objectives
7–64
HIERARCHY OF OBJECTIVES
1. Socio-Economic Vision/ Mission

Purpose (Vision)
2. Mission
Strategic Objectives
3. Overall objectives
4. Specific main
objectives
5. Division objectives Tactical Objectives
6. Department
objectives
7. Unit objectives
Operational objectives
8. Individual objectives
HIERARCHY OF OBJECTIVES
Mission: : Board Of Directors
Strategic Objectives : Top Level Management
Tactical Objectives : Middle level Management
Operational Objectives : Supervisory or Low Level

Management
22
How to Set Objectives

Top Down
Approach
Board of • Vision/ Mission

Directors • Overall Objectives
• Vision/ Mission
Top Level
• Overall/ Specific/ Division
Managers Objectives
• Division level
Middle Level • Department/ Unit Level
Objectives
• Department/ Unit level

Lower Level objectives
Managers • Individual Objectives
Bottom Up
Approach
Characteristics of Objectives
• To be verifiable:
– Quantitative
– Qualitative
• Simple & clearly understandable
• Written
• SMART
– S: Specific
– M: Measurable (Verifiable)
– A: Appropriate (Relevant)
– R: Realistic
– T: Time-bound
Writing Good Objectives

• Writing Good Objectives
– Some main points:
• What specific result is to be achieved?
• When is the result to be achieved?
• How the result is to be measured?
• Who will be responsible for achieving the
result?
• Checklist available on Page No 103
23
Examples : Objectives
• To make a reasonable profit
• To achieve RoI of 12% at the end of the current fiscal year
• To improve communication
• To issue a two page monthly newsletter beginning 1 July, 10
involving not more than 40 man-hours of preparation time.
• To improve productivity of the production department
• To increase production output by 5% by 31 Dec 10 without
additional costs while maintaining the existing quality
standards
• To develop better managers
• To design and conduct a 40-hour in-house Management
training program to be completed by 31 Oct, 10 with
induction of 20 managers, involving not more than 200
working hours.
Managerial Focus in MBO

• MBO managers focus on the result, not the activity.
They delegate tasks by "negotiating a contract of
goals" with their subordinates without dictating a
detailed roadmap for implementation.
• MBO is about setting yourself objectives and then
breaking these down into more specific goals or key
results
Advantages & Disadvantages of MBO

Advantages
• MBO programs continually emphasize what should be
done in an organization to achieve goals.
• MBO process secures employee commitment to
attaining organizational goals.
Disadvantages
• The development of objectives can be time
consuming, leaving both managers and employees
less time in which to do their actual work.
• The elaborate written goals, careful communication of
goals, and detailed performance evaluation required in
an MBO program increase the volume of paperwork in
an organization.
24
Main Reason of Failure of MBO

• In both the public & private sector:
– Absence of a fully committed and involved
top management.
– Dictatorial rather than participatory
development of management objectives
– Participative element ignored and just
implemented the Appraisal portion of MBO
Where & When to Use MBO

• The MBO style is appropriate for:
– Knowledge based companies
– when your staff is competent.
– When you wish to
• build employees‘ management & self-leadership skills
• tap their creativity, knowledge and initiative.
• Also used by CEOs of multinational
corporations (MNCs) for their country managers
abroad
“It's just another tool. It is not the

great cure for management
inefficiency….. MBO works if you
know the objectives, and 90% of
the time you don't.”
(Peter Drucker)
25
Attendance
26

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Management Chapter 4 3/15/2014

Five Managerial Functions

Five Managerial Functions

Expanded Planning Definition

Selecting missions and objectives as

that is , choosing a course of

Why Do Managers Plan?

Relationship of Planning & Controlling

• Planning and Controlling are inseparable

No way for people to tell whether or not they

Planning & Controlling

Relationship of Managerial & Planning Levels

Lets go back ….. !

Do you think the long term planning (Strategic

System in Operational Approach

Feedback (Reenergizing the system)

Organization as a System receives Input, transforms it

Organisation & External Environment

Ecological Organisation Ethical

Finding it very hard to carry out

Guidelines for Mission

“To be the best cellular option for U”.

The end towards which activity is

– Goals, policies, procedures, rules,

– Resources to be employed, &

– Other elements necessary to carry

• A real starting point

• Look at possible opportunities in the light of:

• Must also look at future environment both external

• Setting realistic objectives depends on this

Market, Competition, Customers - Environment

Strengths & Weaknesses

Threats & Opportunities

– Entire organization & each subordinate work unit

– Long Term/ Short term

• Specifying expected results & indicate end points

Organizational objectives give direction to the

Principle of Planning Premises

What kinds of Markets? Which Technology?

Determining Alternative Courses

• Alternatives exists for almost all Plans

Evaluating Alternative Courses

Selecting the Best Course

Real Decision Making

– By establishing Criteria, e.g.:

• Achieving objectives at least cost

• Requiring least changes

• Max RoI (Return on Investment)

– Backup/ Contingency Plan

Formulating Derivative Plans

After Decision making:

• Planning is not complete

• Needs Supportive Plans for Basic

Quantifying Plans by Budgeting

• Final Step – Giving meaning to plans

• Quantify by converting into Budgets

• Sum Total of Income & Expenses

• Balance Sheets – Cash Flow Statements

• Profit/ Loss Statements etc ….

Management by Objectives (MBO)

7–61 © 2005 Prentice Hall

7–62 © 2005 Prentice Hall

7–63 © 2005 Prentice Hall

1. Socio-Economic Vision/ Mission