PLANNING

DEFINITION
Planning is the process of thinking about and organizing the activities required to achieve a
desired goal. Planning is the basic process by which we select our goals and determine how to
achieve them.
Planning is the most basic of all managerial functions. In defining it Koontz says that planning
involves selection from among alternatives future courses of action for the firm as a whole and
for every department or section within it.So when planning managers select organizational
objectives and departmental goals and determine ways of achieving them. It thus provides a
rational approach to preselected objectives.
It will therefore involve:
selecting what objectives are to be achieved
deciding the actions to be take assigned these activities
deciding who will be responsible for the action to achieve them
A plan is a blue print or framework used tggo describe how the organization expects to achieve
its goals. Planning then is simply the process of determining which path among several the
organization wishes to follow. When you plan you map out a course of action in advance.

Importance of Planning
1. Planning therefore gives direction to the activities of the organization. Without plans
people would not know what is to be expected of them.
2. Planning also facilitates control. The plans act as standards against which performance
can be measured and evaluated. Deviations from plans help to point out weaknesses in
the organizational process.
3. Since managerial operations in organizing, leading and controlling are designed to
support the accomplishment of enterprise objectives, planning logically precedes the
execution of all other management functions. Without planning other management
functions would be impossible.
4. Achievement of objectives:- Objectives of the business can be achieved without any
problem as planning provides guidelines for all activities of an enterprise. Good
management is management by objectives (MBO).
5. Planning avoids haphazard actions:- Planning avoids aimless activities. Planning is
necessary for avoiding hit or miss actions or random decisions. Without planning there
will be confusion and chaos. Everyone in the enterprise is aware of what is to be done
for achieving the goals of an enterprise.
6. Planning minimizes uncertainties:- Planning is concerned with the future which is
uncertain and very difficult to predict. The risk and insecurity are minimized, Planning is
essential to keep strict control on future events. An organisation operating with planning
will always be better than that of an organisation operating without planning.
7. Planning brings economy in operations:- Planning leads to purposeful and orderly
activities. The available resources are used to the best of their capacity. All activities are
done in a minimum possible time. All types of wastages are eliminated in all the
departments resulting in the efficient and economical operations of an enterprise. The
cost of operation is minimized.

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 8. Planning and technological development: A business enterprise can survive in the
market only if it uses the latest technology. Through planning, the possibilities of these
technological developments are foreseen by the management so that old and obsolete
machines can be replaced by the new machines.
9. Planning helps in proper utilization of resources: Through planning, the resources
available within the organization can be effectively used. It encourages the employees to
come forward with difficulties being faced by them for the achievement of the targets.

Types of Plans
Given the variety of the areas that organizations plan for, it is obvious that plans fall into
different categories. Plans can either be described in terms of different levels of scope or
different time frames. Described by different levels of scope we have:
a) Strategic Plans- Which are the broad plans developed by top managers to guide the general
direction of the firm. They follow from the major goals of the firm and indicate what business
the firm is in or what business it intends to be.Strategic plans therefore indicate how or where the
firm will position itself within its environment (They are of large scope and extended time
frame).
b) Tactical Plans- These have a moderate scope and intermediate time frame. They are
concerned with how to implement the strategic plans that are already developed. They deal with
specific resources and time constraints. They mainly focus on people and action. Tactical
planning is mainly associated with middle management.
c) Operational Plans- They have the narrowest focus and shortest time frame. These Plans are
developed to handle recurring and relatively routine situations. They include policies which are
general guidelines governing relatively important actions within the organization. Standard
operating procedures which are more specific guidelines for handling a series of recurring
activities. Finally rules and regulations which are statements of how specific activities are to
performed.

Time frame for planning

Regardless of the kind of plan a manager is developing recognition of the importance of time is
essential. Plans either fall under long range, intermediate or short range plans.
Long range planning: Covers several time periods, from five years to as long as several
decades. Long range plans are mainly associated with activities such as major expansion of
products or facilities, development of top managers, large issues of stocks or change of
manufacturing systems. Top managers are responsible for long range planning in most
organizations.
Intermediate planning: range in time from one year to five years. Because of the uncertainties
associated with long range plans, intermediate plans are the primary concern of most
organizations. They are usually developed by both top and middle management. They are the
building blocks in the pursuit of long range plans.
Short range planning: covers time periods of one year or less. They focus on day to day
activities and provide a concrete base for evaluating progress towards the achievement of
intermediate and long range plans

Characteristics of Planning

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1. Planning is goal-oriented.
a. Planning is made to achieve desired objective of business.
b. The goals established should general acceptance otherwise individual efforts &
energies will go misguided and misdirected.
c. Planning identifies the action that would lead to desired goals quickly &
economically.
2. Planning is looking ahead.
a. Planning is done for future.
b. It requires peeping in future, analyzing it and predicting it.
c. Thus planning is based on forecasting.
d. A plan is a synthesis of forecast.
e. It is a mental predisposition for things to happen in future.
3. Planning is an intellectual process.
a. Planning is a mental exercise involving creative thinking, sound judgement and
imagination.
b. It is not a mere guesswork but a rotational thinking.
c. A manager can prepare sound plans only if he has sound judgement, foresight and
imagination.
d. Planning is always based on goals, facts and considered estimates.
4. Planning involves choice & decision making.
a. Planning essentially involves choice among various alternatives.
b. Therefore, if there is only one possible course of action, there is no need planning
because there is no choice.
c. Thus, decision making is an integral part of planning.
d. A manager is surrounded by no. of alternatives. He has to pick the best depending
upon requirements & resources of the enterprises.
5. Planning is the primary function of management / Primacy of Planning.
a. Planning lays foundation for other functions of management.
b. It serves as a guide for organizing, staffing, directing and controlling.
c. All the functions of management are performed within the framework of plans
laid out.
d. Therefore planning is the basic or fundamental function of management.
6. Planning is a Continuous Process.
a. Planning is a never ending function due to the dynamic business environment.
b. Plans are also prepared for specific period f time and at the end of that period,
plans are subjected to revaluation and review in the light of new requirements and
changing conditions.
c. Planning never comes into end till the enterprise exists issues, problems may keep
cropping up and they have to be tackled by planning effectively.
7. Planning is all Pervasive.
a. It is required at all levels of management and in all departments of enterprise.
b. Of course, the scope of planning may differ from one level to another.
c. The top level may be more concerned about planning the organization as a whole
whereas the middle level may be more specific in departmental plans and the
lower level plans implementation of the same.
8. Planning is designed for efficiency.

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 a. Planning leads to accompishment of objectives at the minimum possible cost.
b. It avoids wastage of resources and ensures adequate and optimum utilization of
resources.
c. A plan is worthless or useless if it does not value the cost incurred on it.
d. Therefore planning must lead to saving of time, effort and money.
e. Planning leads to proper utilization of men, money, materials, methods and
machines.
9. Planning is Flexible.
a. Planning is done for the future.
b. Since future is unpredictable, planning must provide enough room to cope with
the changes in customer’s demand, competition, govt. policies etc.
c. Under changed circumstances, the original plan of action must be revised and
updated to male it more practical.

Steps in the planning process

Planning is not a random process but one that generally follows certain steps. However the steps
vary depending on the nature of the plan i.e. whether major or minor. In an exam situation
always use an example to illustrate the planning process such as plan to buy company car, plans
to introduce computers etc.
Step 1: Identification of opportunities
This step includes a preliminary look at possible future opportunities and deciding what the
strengths and weaknesses of the organization are. The manager must have a careful scan of
competition, customers, and the external environment.
Step 2: Establishing objectives
Here the manager must answer the question of "where the organization wants to go, how and
when to get there". Objectives must be established for the entire organization and then for each
unit.
Step 3: Consider planning premises
Need to establish in what environment internal or external the firm's plans will operate.
Questions like what kind of markets will there be? what quantity of sales? what prices? costs?
wage rates? tax rates and policies. In premising the manager establishes and obtains agreement to
utilize and disseminate critical planning premises, which are forecast data of factual nature
applicable to the organizations plans, laws and policies.
Step 4: Determine alternative courses
The alternative courses of action should be determined. For each plan there can be several and
different ways of approaching the objectives.
Step 5: Evaluate the alternatives
The alternative courses should be examined and the strengths and weaknesses determined in the
light of the objectives. The risks and returns involved in each alternative should be examined.
Step 6: Select one course of action
This is the point of decision making, deciding which out of the alternative course of action
should be selected for adoption.
Step 7: Formulate derivative plans
To support the basic plan, some derivative plans are required - for example most plans may go
with the hiring of staff and this needs other smaller plans.

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Step 8: Numberise the plans by budgeting
The plans must be given meaning by converting them into budgets, for example by showing the
incomes, costs and expenses to be expected. Budgets when well formulated become important
standards against which planning progress can be measured.

Principles of Planning
i. Principle of Contribution to Objectives- The purpose of all plans is to facilitate the
achievement of the goals of the organization.
ii. Principle of Primacy of Planning- Says that planning should precede all other managerial
functions. All other managementfunctions cannot be performed without plans.
iii. Principle of Efficiency of Plans -Says that the efficiency of a plan should be measured by its
contributions to objectives as offset by its costs.
iv. Principle of Planning Premises -The better the understanding of planning premises, the
more co-ordinated the plans.
v. Principle of Strategy and Policy Framework- The more strategies and policies are carefully
developed and understood the more consistent and effective plans are likely to be.
vi. Commitment Principle- Logical planning should allow a period in the future necessary to
foresee the accomplishment of plans.
vii. Principle of Flexibility- The more flexible the plans the less the loss incurred through
unforeseen events.
viii. Principle of the Limiting Factor- In choosing from alternatives, only those factors that are
limiting or critical to theattainment of the goals should be considered.
ix. Principle of Navigational Change- The more planning decisions commit for the future, the
more important it is that managersperiodically check on events and expectations and redraw
plans as necessary to maintain acourse towards desired goals.

BARRIERS TO PLANNING
(a) Environmental Barriers-Most organizations operate in environments that are complex and
dynamic where the environmental factors keep changing rapidly e.g. technology, politics and
economic conditions. These changes make it harder to develop effective plans. Plans may
become obsolete even before they are executed.
(b) Poor Goal Setting- The beginning step in planning is goal setting. If the goals set are
unrealistic either they are unattainable or too low. This will hinder effective planning.
(c) Resistance to Change- By its very nature, planning involves change. Fear of the unknown,
preferences for status quo and economic insecurity causes organizational members including
managers to resist change and as such resist planning that might cause such change.
(d) Time and Expense- Lack of time or financial resources can limit planning. Planning takes
time and the managers face many pressures and these pressures may cause them to resist
planning.
(e) Other Constraints- Various situational constraints such as labour contracts, government
regulations, scarce resources, natural factors and disasters may all affect planning.

AVOIDING THE BARRIERS

Certain guidelines if followed by managers can help them deal with the roadblocks to planning.
These include:

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(a) Planning should start at the top- Top managers should set the goals and strategies that
lower level managers will follow.
Top management committed is crucial for any plan to actualise.
(b) Planners should recognize the limits- Managers must recognize that no planning system is
perfect. Planning has limits and cannot be done with absolute precision.
(c) Communication
Vertical communication within the organization hierarchy can facilitate planning. People should
be let to know what is expected of them at all times.
(d) Participation- Managers who are involved in planning are more likely to know what is
going on and therefore be motivated to contribute.
(e) Integration- As much as possible the long term, intermediate and short range plans must be
properly integrated and the better they are integrated, the more effective the organizations overall
planning system.
(f) Contingency planning- Managers should develop alternative actions that a company might
follow if conditions change.
Why people fail in planning
Besides the barriers outlined above there are several other reasons why people fail in planning.
Summarized these reasons are as follows:
i. Lack of commitment to planning
ii. Confusion of planning studies with plans
iii. Failure to develop and implement sound strategies
iv. Lack of meaningful objectives and goals
v. Underestimation of the importance of planning premises
vi. Failure to see the scope of plans
vii. Failure to see planning as a rational process
viii. Excessive reliance on experience
ix. Lack of top management support
x. Lack of adequate control measures

THE PROCESS OF MANAGEMENT BY OBJECTIVES (MBO)

2.4.1 Concept of MBO
Management by objectives is a process that has been developed to facilitate goal setting.
Some books refer to it as management by results or management by goals.
The concept of MBO was articulated by Peter Drucker, who saw MBO as an integrative
management tool that could link the goals of the individuals to those of the firm as a whole.
It is a collaborative goal setting process where the manager and the subordinate work together in
setting the subordinate goals.
The MBO system starts with goal setting at the top management level. These goals are reflected
as the goal setting process progresses level by level (downward) throughout the organization.
Koontz defines MBO as "a comprehensive managerial system that integrates many key
managerial activities in a systematic manner consciously directed at the effective and efficient
achievement of organizational and individual objectives (students need to note that there are
several views about MBO, some see it as a planning tool and others as a performance appraisal
tool).

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Being a collaborative goal setting between the manager and his subordinate, both willingly
determine goals for the subordinate on the premises that the subordinates future rewards will
depend on how well he attains the goals.
It assumes that:
• Goals should start at the top and then flow down to each successive level until the bottom of
the organization.
• Through the process of collaboration employees will become more committed toachieving
organizational goals. They will take part in setting their own goals and will be rewarded in
relation to their success in reaching those goals.
How MBO works
Ideally the process starts at the top of the organization with the top management setting the
overall organizational goals.The overall goals are then communicated to all the employees at all
levels.
Each employee then meets with his superior to discuss the superior's goals and how the
employee can help achieve them.The two together then set them and agree on the subordinate
goals.
The superior advises the employee on how to tackle thegoals.They also decide on what resources
the employee needs to achieve the goals.
As the employee works towards the goals they hold periodic meetings to review and assess
progress.At the end of the specified period, the superior and employee hold a meeting to evaluate
the degree of goal attainment.
If the employee has succeeded, he is rewarded and they start the process again for the goals of
the next period.
So in MBO the manager and his subordinate work together in setting goals, deciding what
resources are needed to achieve the goals and evaluating the progress.
Strengths and weaknesses of MBO
Strengths:
• Better Managing
MBO if well implemented can result in much improved managing. MBO forces managers to
think planning for results. It also forces them to think of how the objectives will be
accomplished, the resources necessary to achieve these objectives e.g. personnel needed.
The goals set also act as a good incentive for control.
• MBO Clarifies Organizations
Managers are forced to clarify organizational roles and structure. It clearly shows areas of
delegation of authority in order to achieve the results.
• Personal Commitment
It encourages employees to commit themselves to their goals. Goals which they themselves have
set. Employees have a better understanding of their role and authority in the organization. Little
time is wasted waiting for instructions. People know what they have to do and with what tools
and they become enthusiastic masters of their own fate.
• Development of Effective Controls
The goals that are set in the process of MBO serves as clear results against which performance
can be measured. Infact even the employee is able on his own to gauge his own performance.
Under MBO organizational energies are focused on organizational goals.
MBO helps elevate morale. If the employee succeeds he is rewarded. Pay is a motivator.

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MBO also aids in personnel development and can be a superior tool for evaluation than traits
evaluation.
Weaknesses:
• MBO is time consuming.
• Conditions in the environment change too frequently for MBO to work.
• Failure on the part of the management to teach the philosophy of MBO i.e. that it is built on
self control and self direction.
• If not properly implemented it could be resented by subordinates especially because of the
difficulties in setting goals (especially verifiable goals).
• Involves dangers of inflexibility, subordinates may stick to goals set even when conditions
have changed.
• Failure to give guidelines to goal setters - MBO like any other kind of planning cannot work if
those expected to set goals are not given needed guidelines. If corporate goals are vague, unreal
or inconsistent then it is impossible for managers to guide employees to set any meaningful
goals.
• Other influences outside the control of management.
• Danger of managers forgetting that there is more to management than goal setting.
• The multiple goals faced by managers which are impossible to state in end results or to
communicate e.g. favourable company image.
Note:
Despite all these weaknesses if used properly MBO can enhance motivation and communication
and therefore lay the foundation for a more effective organization.

STRATEGICPLANNING
Introduction
The need to study planning starting from the area of strategic planning has been necessitated by
three main reasons:
• Strategic planning has increasingly become a fact of organizational life. The presence of a
strategic plan or the lack of one is usually the starting point in understanding and evaluating the
work of managers. When you think about an organization, the first thing that you are likely to
reflect on is "what is its strategy?"
• Strategic planning provides the basic framework within which other forms of planning should
take place (all activities of an organization depend on its strategy).
• An understanding of strategic planning makes it easier to understand the other forms
of planning.
A vital component in the strategy of strategic planning is the organizational goals. Without
a clear grasp of these, the study of strategic planning can prove very difficult.
Organizational goals provide the basic sense of direction for the activities of that organization.
The term goals is used to include purpose, mission and objectives terms which most people use
interchangeably.
Purpose is the primary role of an organization as defined by the society in which it operates. It is
a broad aim that applies not only to a given organization but to all organizations of its type in
that society. For example we could say that in Kenya the purposes of all hospitals is to provide
Health Care.

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2.5.2 (a) Mission
The mission of an organization is the unique aim that sets that organization apart from others of
its type. It is the broad aim that a given organization chooses to pursue for itself.
While the purpose of all hospitals in Kenya is to provide Health Care, the missions of the various
hospitals differ. For example the mission of IDH is to provide Health Care in the field of
infectious diseases only, while for Pumwani Hospital it is to provide Maternity Health Care. The
mission statement specifies four factors:
• The customers which an organisation caters for
The identified needs of the customers
• The products or services plus the values to satisfy customers, and
• The boundaries of organisational operations.
The purpose of all universities is to produce graduates but for Kenyatta University the mission is
to produce graduates in Education, while Egerton University is to provide graduates in
Agriculture.
Objective is the target that must be reached if the organization is to achieve its goals.
Objectives are the translation of the mission into specific, concrete terms against which results
can be measured.
Strategy is the broad program for achieving the organizations objectives and thus implementing
its mission. Program implies an active conscious and rational role played by managers in
formulating the organizations strategy.
Strategy can also be defined as the pattern of the organization's response to its environment over
time. It links the human and non human resources of the organization to the challenges and risks
posed by the outside world.
2.5.2 (b) What is Strategic Planning?
Strategic planning has been defined (Stoner) as the formalized, long range planning process
used to define and achieve organizational goals.
It involves:
• Defining the organisational mission
• Analyzing the situation (internal and external environments)
• Selecting organisation’s goals and objectives
• Determining the policies and strategic programs necessary to achieve goals and
objectives
• Establishing the methods necessary to assure that the policies and strategic
programs are implemented and
• Matching the selected strategies with the identified opportunities and threats in the
external environment.
Strategic planning has the following characteristics:
• deals with fundamentals of basic problems by providing answers to such questions
as "what is our business?", "what business ought we to be in" "who are our
customers and who should they be?"
• provides a basis for more detailed planning and for day to day managerial decisions.
• involves a longer time frame than other form of planning
• it is a top level activity - top management must be actively involved as they are the
ones with the information necessary for strategic decisions.
• it helps to integrate and unify the actions of the organization over time.

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• it provides guidance and boundaries for operational planning
Note
Students must differentiate between strategic planning and operational planning
(Operational plan is done at low levels and its main focus is current operations and efficiency).
Summarized the main differences between the two are:
• Operational planning's objective is present profits while strategic planning's objective is on
future profits.
• Operational planning mainly focuses on operation problems while strategic focuses on longer
term survival and development.
• Operational planning faces present resources environmental constraints while strategic is
concerned with future resources environmental constraints.
• Operational planning deals with information relating to present business while strategic deals
with information relating to future opportunities.
• For operational planning rewards are mainly current efficiency and stability but for strategic
they are the development of future potential.
• Organization in operational planning is traditionally bureaucratic while with strategic planning,
it is mainly flexible/entrepreneurial.
• Leadership for operational planning is traditionally conservative but for strategic
planning leadership is sensitive to radical change.

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