Essentials of Planning

1
 What Is Planning?
Planning
involves defining the organizations goals,
establishing an overall strategy, and developing a
comprehensive set of plans to integrate and
coordinate organizational work
informal planning - nothing is written down
little or no sharing of goals
general and lacking in continuity
formal planning - written
defines specific goals
specific
Prentice Hall, 2002 action programs exist to achieve goals
 Set Control Growing Provide
Standards complexities Direction

Need for Reasons Rapid socio-

Economic
R&D activity for Planning changes

Minimize Reduce the

Growth of
Waste / Impact of
trade union
Redundancy Change
 What Planning Accomplishes
/Benefits of Planning
Allows decisions to be made ahead of time.
Permits anticipation of consequences.
Provides direction and a sense of purpose.
Provides a unifying framework; avoiding piecemeal decision
making.
Improves competitive strength
Achieves better coordination
Helps identify threats and opportunities and reduces risks.
Facilitates managerial control through the setting of standards for
monitoring and measuring performance.
Encourages innovation & creativity
 Rigid Assumptions
of Stability

Environmental
Arguments Turbulence
Against Intuition
and Creativity
Strategic
Focus on Todays
Planning Competition

Preoccupation with
Current Success
 Does Planning Improve Performance?

Financial results

Environmental concerns

Quality and implementation

 Why Do Managers Plan?
/ Importance of planning
Purposes of Planning
Planning is the primary management function that
establishes the basis for all other management functions
Planning establishes coordinated effort
Planning reduces uncertainty
Planning reduces overlapping and wasteful activities
Manage complexities & competition
Planning establishes goals and
standards used in controlling
To increase org effectiveness
 Why Do Managers Plan?
(cont.)
Planning and Performance
Generally speaking, formal planning is associated with:
Higher return on assets
Higher profits
Quality of the planning process and the appropriate
implementation of the plans probably contribute more to
high performance than does the extent of planning
External environment may undermine the effects of
formal planning
Planning/performance relationship is influenced by the
planning time frame
 Definition of Planning
Weihrich & Koontz Planning involves selecting missions and
objectives and the actions to achieve them; it requires decision
making, that is, choosing from among alternative future courses
of action.
McFarland Planning may be broadly defined as a concept of
executive action that embodies the skills of anticipating,
influencing & controlling the nature &direction of change.
Terry Planning is the selection & relating of fact & making &
using of assumption regarding the future in the visualisation &
formation of proposed activities believed necessary to achieve
desired result.
 Features/ nature of planning
Planning is an intellectual process
Planning determines the future course of action
Primarily concerned with looking into future
Involves selection of suitable course of action, means there are
several alternatives for achieving objectives
All levels are concerned with the determination of future course of
action.
Planning is the most basic to all mgmt functions
Planning is pervasive function of mgmt
Planning is flexible because future is always dynamic
Planning is a pervasive & continuous managerial function involving
complex processes of perception, analysis, conceptual thought,
communication, decision,& action
 Benefits of planning

Reduces uncertainty
Encourage innovation & creativity
Improves motivation
Achieve better coordination
Facilitates control
Planning leads to success
Focuses attention
 (1)
Mission
or Purposes,
(2) Objectives or goals,
(3) Strategies,
(4) Policies,
(5) Procedures,
(6) Rules,
(7) Programs, and
(8) Budgets

Hierarchy Of Plans
 Hierarchy of Plans (cont..)

Plans can be classified as

(1) mission or purposes,
(2) objectives or goals,
(3) strategies,
(4) policies,
(5) procedures,
(6) rules,
(7) programs, and
(8) budgets
 Hierarchy of Plans
(cont..)
The mission, or purpose, identifies the basic purpose or
function or tasks of an enterprise or agency or any part of it
Objectives, or goals, are the ends toward which activity is
aimed
Strategy is 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
Policies are general statements or understandings that guide or
channel thinking in decision making
Procedures are plans that establish a required method of
handling future activities
 Hierarchy of Plans
cont.

Rules spell out specific required actions or

non actions, allowing no discretion
Programs are 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
A budget is a statement of expected results expressed in numerical
terms
 Steps in Planning

1. Being Aware of Opportunities

2. Establishing Objectives or Goals
3. Developing Premises
4: Identify / Determining Alternative Courses
5. Evaluating Alternative Courses
6. Selecting a Course
7. Formulating Derivative Plans
8. Quantifying Plans by Budgeting
 STEPS IN PLANNING
Being aware of opportunity :In light of Market, Competition Customer
desire, Our strengths Our weaknesses
Setting objectives or goals: Where we want to be& what we want to
accomplish & when
Considering planning premises: In what environment will our plans
operate
Identifying alternatives: What are the most promising alternatives to
accomplishing our objectives
Comparing alternatives in light of goals sought Which alternative meets
our goals at lowest cost &at highest profit
Choosing an alternative Selecting the course of action
Formulating derivative plans such plans as to :- Buy equipment Buy
materials, Hire& train workers,
Budgets: Develop such budgets as Volume & price of sales, operating
expenses necessary for plans, Capital expenditure
 Types Of Plans
Frequency
Breadth Time Frame Specificity of Use

Strategic Long term Directional Single use

Operational Short term Specific Standing

Prentice Hall, 2002

 Types Of Plans

Types of Plans based on Breadth

strategic plans - apply to the entire organization
establish organizations overall goals
seek to position the organization in terms of its environment
operational plans - specify the details of how the overall
goals are to be achieved
tend to cover short time periods

Prentice Hall, 2002

 Types Of Plans
Types of Plans based on Time
long-term plans - time frame beyond three years
definition of long term has changed with increasingly uncertain
organizational environments
short-term plans - cover one year or less
Types of Plans based on specification
specific plans - clearly defined with little room for
interpretation
required clarity and predictability often do not exist
directional plans - flexible plans that set out general
guidelines
provide focus without limiting courses of action
Prentice Hall, 2002
 Specific Versus Directional Plans

Prentice Hall, 2002

 Types Of Plans

Types of Plans based on frequency of use

single-use plans - one-time plans specifically designed to meet
the needs of a unique situation
standing plans - ongoing plans that provide guidance for
activities performed repeatedly
include policies, procedures, and rules

Prentice Hall, 2002 7-22

 Planning In The Hierarchy Of
Organizations
Strategic Top
Planning Executives

Middle-Level
Managers

First-Level
Operational Managers
Planning
Prentice Hall, 2002
 Developing Plans (cont.)

Approaches to Planning
traditional, top-down approach
planning done by top managers
formal planning department - specialists whose sole responsibility is to
help to write organizational plans
plans flowed down to lower levels
tailored to particular needs at each lower level
most effective if plan is a workable document used by organizational
members for direction and guidance

Prentice Hall, 2002

 Developing Plans (cont.)

Approaches to Planning (cont.)

inclusive approach
employees at each level develop
plans suited to their needs
employees acquire greater sense of
the importance of planning when they
participate in the process
plans more likely to be used in
directing and coordinating work

Prentice Hall, 2002

 Principles of planning based on
Purpose
and Nature Of Planning
. Principle of contribution to objectives: Purpose of every plan
& all supporting plans is to promote accomplishment of enterprise
objectives
. Principle of objectives: If objectives have to be meaningful to
people, they must be clear, attainable, & verifiable
. Principle of primacy of planning.:... Planning logically
precedes all other managerial functions
. Principle of efficiency of plans: Efficiency of a plan is
measured by the amount it contributes to purpose & objectives as
Principles--the Structure Of Plans
. Principle of planning Premises: The more thoroughly
the individuals who are charged with planning, understand
and agree to utilize consistent planning premises, the more
coordinated enterprise planning will be

. Principle of the strategy and policy frame work: The

more strategies and policies are clearly understood and
implemented in practice, the more consistent and effective
will be the frame work of enterprise plans
Principles--the Process Of Planning

. Principle of limiting factor: In choosing among

alternatives, the more accurately individuals can recognize and
solve for those factors which are limiting or. critical to attainment of
desired goals, the more easily and accurately they can select the
most favorable alternative
. The commitment principle: Logical planning should cover a
period of time in the future necessary to foresee as well as possible,
through a series of actions, the fulfillment of commitments involved
in a decision made today
 Principles--the Process Of Planning
(Cont..)
. Principle of flexibility...:. Building flexibility into plans will
lessen danger of losses incurred through unexpected events, but
cost of flexibility should be weighed against its advantages
. Principle of navigational change: The more that planning
decisions commit individuals to a future path, the more
important it is to check on events and expectations periodically
and redraw plans as necessary to maintain a course toward a
desired goal
 Developing Plans

Contingency Factors in Planning

level in the organization
operational planning dominates managers planning
efforts at lower levels
strategic planning more characteristic of planning at
higher levels

Prentice Hall, 2002

 Developing Plans (cont.)

Contingency Factors in Planning (cont.)

degree of environmental uncertainty
when uncertainty is high, plans should be specific, but flexible
length of future commitments
commitment concept - plans should extend far enough to meet those
commitments made when the plans were developed
the more that current plans affect future commitments, the
longer the time frame for which managers should plan

Prentice Hall, 2002

 Contemporary Issues In Planning

Criticisms of Planning
1. Planning may create rigidity
unwise to force a course of action when the environment is fluid
2. Plans cant be developed for a dynamic environment
flexibility required in a dynamic environment
cant be tied to a formal plan
3. Formal plans cant replace intuition and creativity
mechanical analysis reduces the vision to some type of programmed
routine

Prentice Hall, 2002

 Contemporary Issues In
Planning (cont.)

Criticisms of Planning (cont.)

4. Planning focuses managers attention on todays
competition, not on tomorrows survival
plans concentrate on capitalizing on existing business opportunities
hinders managers who consider creating or reinventing an industry
5. Formal planning reinforces success, which may lead to
failure
success may breed failure in an uncertain environment

Prentice Hall, 2002

 Contemporary Issues In Planning
(cont.)
Effective Planning in Dynamic Environments
develop plans that are specific, but flexible
recognize that planning is an ongoing process
change directions if environmental conditions
warrant
stay alert to environmental changes

Prentice Hall, 2002

 Barriers to effective planning
Difficulty of accurate premising
Problems of rapid change
Internal inflexibilities
policy & procedural inflexibility
capital investment
External inflexibility
political climate
trade unions
technology changes
Time & cost factors
Failure of people in planning
 How Do Managers Plan?
The Role of Goals and Plans in Planning
goals - desired outcomes
provide direction for all management decisions
represent the criteria against which actual work accomplishments can
be measured
plans - outline how goals are going to be met
Types of Goals
all organizations have multiple objectives
no single measure can evaluate whether an organization is successful
financial goals - relate to financial performance
strategic goals - relate to other areas of performance 7-36
 Stated Objectives From Large US
Companies

Prentice Hall, 2002 7-37

 How Do Managers Plan? (cont.)

The Role of Goals and Plans in Planning (cont.)

Types of Goals (cont.)
stated goals - official statements of the
organizations goals
real goals - those goals that an organization
actually pursues

Prentice Hall, 2002

 Establishing Goals

Approaches to Establishing Goals

traditional goal setting - overall goals established at the top of the
organization
overall goals broken down into sub-goals for each level of the
organization
higher-level goals must be made more specific at lower levels
network of goals creates a means-ends chain
Sub-goals constrain subordinates behavior
assumes that top managers know what is best for the organization
Prentice Hall, 2002
 How Do Managers Plan? (cont.)

Establishing Goals (cont.)

Approaches to Establishing Goals (cont.)
management by objectives (MBO) - specific performance goals are
jointly determined by employees and their managers
progress toward accomplishing these goals is periodically reviewed
rewards are allocated on the basis of this progress
MBO consists of four elements
goal specificity
participative decision making
explicit time period
performance feedback
Prentice Hall, 2002 7-40
 Traditional Objective Setting

Top
We need to improve
Managements
the companys performance
Objective

Division I want to see a

Managers significant improvement
Objective in this divisions profits

Department
Increase profits, regardless
Managers
of the means
Objective

Individual Dont worry about

Employees quality: just work fast
Objective
 Steps in a Typical MBO Program

Prentice Hall, 2002 7-42

 Establishing Goals (cont.)

Approaches to Establishing Goals (cont.)

management by objectives (cont.)
increases employee performance and organizational
productivity
depends on support of top managers for MBO
problems with MBO
- can be useless in times of dynamic change
-overemphasis on personal rather than
organizational goals
-may be viewed simply as an annual exercise
in paperwork

Prentice Hall, 2002

 Establishing Goals (cont.)

Characteristics of Well-Designed Goals

should be written in terms of outcomes
should be measurable and quantifiable
should be clear as to a time frame
should be challenging but attainable
should be written down
should be communicated to all organization members who
need to know the goals

Prentice Hall, 2002

 Establishing Goals (cont.)

Steps in Goal Setting

1 - Review the organizations mission
2 - Evaluate available resources
3 - Determine the goals individually or with input from
others
should be congruent with the organizational mission and goals
in other organizational areas
4 - Write down the goals and communicate them to all
who need to know them
Prentice Hall, 2002
5 - Review results and whether goals are being met
Hierarchy of Goals

FIGURE 41
 Principles of Goal-Setting
Set SMART goalsmake them specific,
measurable, attainable, relevant, and timely.
Choose areas (sales revenue, costs, and so forth)
that are relevant and complete.
Assign specific goals.
Assign measurable goals.
Assign doable but challenging goals.
Encourage participation.
Use executive assignment action plans, or
management by objectives.