Weihrich and Koontz

8th Edition

© 2010

An International Perspective
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Chapter Objectives
After studying this chapter, you should be able to:

1. Understand what managerial planning is and why it is

important

2. Identify and analyze the various types of plans and

show how they relate to one another

3. Outline and discuss the logical steps in planning and

see how these steps are essentially a rational
approach to setting objectives and selecting the
means of reaching them

4. Explain the nature of objectives

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Chapter Objectives
After studying this chapter, you should be able to:

5. Describe how verifiable objectives can be set for

different situations

6. Outline the evolving concepts in Management by

Objectives (MBO)

7. Understand the model of the systems approach to

MBO

8. Describe the benefits of MBO

9. Recognize the weaknesses of MBO and ways to

overcome them
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Definition of Planning
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.
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Planning: PURPOSE
• IF GROUP EFFORT IS TO BE EFFECTIVE, PEOPLE
MUST KNOW WHAT THEY ARE EXPETED TO
ACCOMPLISH. THIS IS THE FUNCTION OF
PLANNING.

• PLANNING INVOLVES SELECTING MISSIONS AND

OBJECTIVES AND ACTIONS TO ACHIEVE THEM.

• PLANNING REQUIRES DECISION MAKING AND

CHOOSING FROM AMONG ALTERNATIVE
FUTURE COURSES OF ACTION.
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Planning:
PLANNING PROVIDES A RATIONAL APPROACH
TO ACHIEVING PRE SELECTED OBJECTIVES.

• PLANNING BRIDGES THE GAP FROM WHERE WE

ARE TO WHERE WE WANT TO GO.
• PLANNING MAKES THINGS HAPPEN.
• PLANNING IS AN INTELLECTUALLY DEMANDING
PROCESS.

• PLANNING REQURIRES CONSCIOUS

DETERMINATION OF COURSES OF ACTION.
• PLANNING AND CONTROLLING ARE
INSEPERABLE.
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Planning:
• PLANNING IS A FUNCTION OF ALL MANAGERS –
PLANNING IS PERVASIVE
• PLANNING MUST BE EFFICENT.
• REVENUE > COSTS.

• THE PURPOSE OF EVERY PLAN IS TO

CONTRIBUTE TO THE ACCOMPLISHMENT OF
ENTERPROSE PRUPOSE AND OBJECTIVES.

• PLANNING ENCOMPASSES ANY COUSRE OF

FUTURE ACTION.
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Types / Hierarchy of Plans

Plans can be classified as:

(1) mission or purposes

(2) objectives or goals
(3) strategies
(4) policies
(5) procedures
(6) rules
(7) programs
(8) budgets
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Mission Statement:
• A mission statement is a statement of the purpose of a company,
organization or person, its reason for existing.
• The mission statement should guide the actions of the
organization, spell out its overall goal, provide a path, and guide
decision-making. It provides "the framework or context within
which the company's strategies are formulated." It's like a goal
for what the company wants to do for the world.

• DU PONT
• BETTER THINGS THROUGH CHEMISTRY
•
MISSION STATEMENT:
• FEASIBLE, REALISTIC
• PRECISE, NOT TOO NARROW NOR TOO BROAD
• CLEAR ENOGUH TO LEAD TO ACTION. NOT FOR PLATITUDES /
PUBLICITY
• PRIORITIZE CORE VALUES IN MISSION STATEMENT.
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Types / Hierarchy of Plans

1. The mission, or purpose, identifies the basic
purpose or function or tasks of an enterprise or
agency or any part of it. This gives meaning to
every kind of organized operation

2. Objectives, or goals, they are the ends toward

which activity is aimed. They are end point of
planning.

3. 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 .
They provide a framework for guiding thinking
and acting (an approach )
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Types / Hierarchy of Plans
4. Policies are general statements for guiding
or channel thinking in decision making .

Policies are guiding principles which govern

action, usually of routine and repetitive nature.

• They channelize and assist decision making.

• (eg) policies for hiring, firing, promotion, over
time etc.
• Types of policies : functional; internal (personnel); basic or
general; departmental (no of quotations, FIFO, QC);
explicit, implicit. [Gifts, Talking to media, Visitors inside
factory, Fire prevention, Safety]
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Types of Plans
5. Procedures are plans that establish a required
method of handling future activities

• “a procedure is a series of related tasks that make up

the chronological sequence and the established way of
performing the work, to be accomplished.”

• Characteristics of procedure:
• they involve methods for doing different jobs.
• they may concern many departments.
• they are pervasive.
• they facilitate decision making.
• they help implementation of policies.
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Types of plans:
6. Rules spell out specific required actions or
nonactions, allowing no discretion.
(eg) Traffic Rules, uniform, timecard
punching, car parking etc

7. Programs are a set of 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
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Types of Plans:

8. A budget is a statement of expected

results expressed in numerical terms

• Since it is a statement of expected results, it

is also used as a tool of management
control.
• they provide standard by which actual
operations can be measured and variations
are checked.
(expense, cash flow, capital, sales)
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Types of Plans
• Strategic Planning.
• Functional Planning.
• Short Range Planning.
• Long Range Planning.
• Standard Plans.
• Project Plans / Single Use Plans
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STEPS IN PLANNING

1. Being Aware of Opportunities

2. Establishing Objectives or Goals
3. Developing Premises
4: Determining Alternative Courses
5. Evaluating Alternative Courses
6. Selecting a Course
7. Formulating Derivative Plans
8. Quantifying Plans by Budgeting
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Steps in Planning:
• The steps indicated are for major plans, minor
plans are usually simpler.,

• Managers must study the feasibility of possible

courses of action at each state.

• In establishing objectives, it is necessary to

have premises underlying the plans.

• Problems or opportunities?
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Steps in Planning:

• Objectives or Goals:
• They are the ends towards which
organizational and individual activities
are directed.
• They form hierarchy as well as net work.
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Steps in Planning:

• Premises: are assumptions about the

environment in which plans are to be carried
out.

• They include forecast about economy,

markets, competition, demand and supply,
wage rates, tax rates, government policies,
political / social environment, etc.
• (World Bank, IMF, CII, National Council for Applied
Economic Research, Trade reports,
CMIE, KPMG , CRISIL, PwC, BCG)
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Steps in planning:
• Planning Premises:
• information covers the following;

• what kind of markets – what volume of

sales – what prices – what technology –
what costs – what wastes – what taxes
and subsides – what competition – what
dividends and profits – what finance –
what political situation – what long term
trends etc.
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Coordination of Short- and

Long-Range Plans

No short-run plan should be made

unless it contributes to the
achievement of the relevant long-
range plan.
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OBJECTIVES
 Objectives are the important ends toward
which organizational and individual
activities are directed

 An objective is verifiable when at the end of

the period one can determine whether or not
the objective has been achieved

• Personal interests may have to be

subordinated to organizational objectives.
• Objectives form a hierarchy as well as a
network. fig 6-1.
Cascading of Objectives
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The Nature of Objectives

 Hierarchy of Objectives – Fig 4-3.
 Overall objectives ( long range and
strategic)
 More specific overall objectives:
Key Results Areas: Areas in which
performance is essential for success

 Divisional objectives: Setting objectives

and the organizational hierarchy.
 Departmental objectives.
 Individual objectives
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Key Result Areas

• Market Share.
• New Products.
• Productivity.
• Physical Resources.
• Financial Resources.
• Profitability.
• Sales Growth.
• Quality.
• Manager Performance
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How to Set Objectives
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How to Set Objectives

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Checklist for Manager Objectives

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Checklist for Manager Objectives

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NETWORK OF OBJECTIVES:
• Both objectives and planning programs
normally form a network of desired results.
• Goals and plans are seldom linear and they
form interlocking networks. see fig 6-2.
• Each of the program could itself be broken
down into an interlocking network.
• Components of the work must fit one another.
what is needed is a matrix of mutually
supportive goals.
Network of Objectives
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EVOLVING CONCEPTS IN MBO

 Management by objectives is a
comprehensive managerial system - that
integrates many key managerial activities
- in a systematic manner

 MBO is consciously directed toward the

effective and efficient achievement of
organizational and individual objectives
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MBO
• MBO is also an appraisal tool.
• MBO is a planning and control tool.
• MBO is also a motivational technique.
• MBO as a strategic planning tool.
• Peter Drucker was first to suggest MBO.
McGregor recommended it as an appraisal
tool.
• Objectives must be preferably verifiable.
• Each goal and sub goal should be one
particular person’s responsibility.
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Systems Approach to MBO

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Benefits of Management by Objectives

MBO provides clear goals.

MBO Motivates

 Improves managing through results-

oriented planning
 Clarifies organizational roles, structures
and the delegation of authority
 Encourages personal commitment to their
own and organizational goals
 Facilitates effective controlling, measuring
results, and leading to corrective actions
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MBO Benefits:
• “there are two things, that might be considerred
fundamental creed at Honeywell: Decentralized
management is needed for Hoenywell to work and
MBO is needed to make decentralization work”.
• encouragement of personal commitment.
• development of effective controls.
• most powerful tool for decentralization of
authority.
• mbo as a motivational tool.
• goal setting
• participation
• incentives
• autonomy
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Failures of Management by Objectives

 Pursuing short term goals, danger of
inflexibility, failure to teach the
philosophy of MBO, difficulty in setting
verifiable goals.

• limitations of human services delivery.

• over use of quantitative economic goals
• managing is more than goal setting.
Reason for planning:
• Planning provides direction
• It reduces the impact of change
• It minimizes waste and redundancy
• It sets standards to facilitate control
• Planning establishes coordinated effort.
• Planning reduces uncertainty
Potential drawbacks of planning:
• It may create rigidity
• It is difficult to develop plan for very dynamic
environment
• Planning cannot replace intuition and
creativity
• It focuses attention on today’s competition
and not on tomorrow’s survival
• Successful plans may provide a false sense
of security
Type of Plans: Exhibit 3-2
 Type of Plans
• Directional plans are flexible plans that set out
general guide lines
• Single use plan is that used to meet the needs
of a particular or unique situation.

• Directional plan are preferred over specific

plans when managers face uncertainty in their
environments and desire to maintain flexibility in
order to respond to any unexpected changes.
Four ingredients of MBO are:
Goal specificity -
Participative Decision making -
Explicit time periods -
Performance feedback & reward
How to set employee objectives?

• Identify employee’s key job tasks / key result

areas
• Establish specific and challenging goals for
each task
• Allow employee’s active participation
• Prioritize goals
• Build feed back mechanism to asses goal
progress
• Link rewards to goal achievement