3/11/2024 Principles of

Management
PLANNING

Wafula, Moses Juma & Katenya, Brian Juma

JKUAT – KITALE BRANCH
 BIT 2309 PRINCIPLES OF MANAGEMENT

GROUP ONE: - PLANNING

Composition of GRP 1:

1. WAFULA, Moses Juma

2. KATENYA, Brian

PLANNING:

Planning is considered the first primary function of management. In this function, managers
define the organizational goals and allocate resources of the organization to achieve such goals.
So planning will also define all the future functions of management.

So in essence business planning comprises of setting objectives for the organization and
developing a plan of action to achieve these objectives. Once the objectives are set, the managers
and workers can have a clear vision of what to work towards.

A planner has to think about the following aspects:-

(a) What is to be done?

(b) How is it to be done?
(c) When is it to be done?
(d) By whom is it to be done?

Importance of Business Planning

(a) Planning provides a sense of Direction

(b) Planning reduces Uncertainty
(c) Planning reduces Improvidence
(d) Planning invokes Innovation
(e) Makes Decision-Making Easier
(f) Establishes Standards

Limitations of Planning

(a) Rigidity
(b) Not ideal in Dynamic Conditions
(c) Planning can also reduce creativity
(d) Planning is Expensive
(e) Not Completely Accurate

Steps in Planning:-

Conceived as a process, planning embraces a series of steps:-

(a) The determination of objectives to be sought;

(b) Research to understand the problem;
(c) The discovery of alternative solutions;
(d) Policymaking. Choosing between alternatives, including the frequent choice of doing nothing;

1
 (e) The detailed execution of the chosen alternative known in physical planning as layout or
design.

Characteristics of Planning

1. Planning, an Intellectual Process:

Planning is intellectual in nature; it is mental work. The facts relevant to the situation are related
to the manager’s experience and knowledge. A planner must visualize the situations likely to
develop in future. He should develop a future course of action to be taken for implementation of
plans.

2. Primacy of Planning:

Planning is the first function of a planner. Other functions like organizing, staffing, directing,
controlling, etc. are followed by planning. Without planning no other function can be performed.

Planning

Controlling Organizing

Directing Staffing

3. All Managers Plan:

Every manager in an organization has a planning function to perform. It may also be said that
planning is a fundamental managerial function. The pervasiveness of planning is generally over-
looked. It is felt that planning is done at top levels only. This may be true to certain extent that
people at top level devote most of their time to planning than the managers at middle and lower
levels of management but every manager at his level of activity has to plan his activities. The
degree, importance and magnitude of planning depends on the level at which it is performed.

4. Planning: A Rational Approach:

Planning process is a rational approach to the achieving of organisational goals. An action is

rational if it is objectively and intelligently decided. The aim of management is to reach the goals
with the application of appropriate resources. Planning suggests a number of alternatives for
reaching the goals.

2
5. Focus on Objectives:

An organisation employs a number of persons. Each one of them has different personality and
attitude. There will be a difference of opinion about the objectives of the enterprise and the
methods to achieve them. Planning focuses attention on setting up organisational objectives and
suggests ways to achieve them. The objectives influence the future course of every business. If
the objectives are not properly set then the efforts spent on them will go waste. The main purpose
of planning is to focus attention on setting up of appropriate objectives.

6. Leads to Efficiency and Economy:

Planning involves the efficient utilisation of various resources like capital, labour, machines,
materials etc. Every factor of production is put to efficient and economical use so that the output,
i.e., results, is more than the efforts employed. An effort is made to achieve organisational
objectives with minimum resources. Planning helps in controlling duplication of efforts which
also ensures economy.

7. Co-ordination:

Co-ordination is essential for harmonious working of the organisation. Planning co-ordinates the
what, who, how, why and where of planning. In the absence of planning different segments of the
organisation may pursue divergent objectives.

8. Flexibility:

Planning process should be adaptable to the changing business environment. If planning is made
rigid then it will not be able to achieve business goals. Planning is a dynamic process and it adjusts
with the needs and requirements of the situations.

The Six P’s of Planning

(a) Purpose
(b) Philosophy
(c) Promise
(d) Policies
(e) Plans
(f) Priorities

Reasons for Planning

(a) Essential for Modern business

(b) Related to performance
(c) Focus on Objectives
(d) Proper Allocation of Resources
(e) Facilitates Control
(f) Helpful in Decision making
(g) Avoiding Business Failures

3
 PLANNING BY OBJECTIVES OR MANAGEMENT BY OBJECTIVES (MBO)

Planning by objectives, often referred to as Management by Objectives (MBO), is a systematic

approach to planning and managing the activities of an organization. In this process, goals and
objectives are established collaboratively by managers and employees, and these objectives serve
as the basis for planning, organizing, and controlling organizational activities.

Key features of planning by objectives include:

a. Setting Clear Goals: The process begins with setting specific, measurable,
achievable, relevant, and time-bound (SMART) objectives for individuals, teams,
and the organization as a whole.
b. Participative Goal Setting: Goals are established through collaboration between
managers and employees, ensuring alignment with organizational objectives and
fostering a sense of ownership and commitment among employees.
c. Goal Alignment: Objectives at each level of the organization are aligned with
broader organizational goals, ensuring that every individual's efforts contribute to
the achievement of overall objectives.
d. Performance Measurement: Progress towards objectives is regularly monitored
and evaluated using predetermined metrics, allowing for timely feedback and
corrective action as needed.
e. Employee Development: Planning by objectives provides opportunities for
employee growth and development by setting challenging yet attainable goals and
providing support and resources to help employees succeed.
f. Continuous Improvement: The process encourages a cycle of continuous
improvement, where feedback from performance evaluations is used to refine
goals, strategies, and processes over time.

Overall, planning by objectives emphasizes clarity, alignment, accountability, and continuous

improvement, making it a powerful tool for driving organizational success.

PRINCIPLES OF PLANNING

1. Principle of Contribution to Objectives:

All types of plans are prepared to achieve the objectives of the organisation. Both major and
derivative plans are prepared to contribute to the objectives of the enterprise. Planning is used
as a means to reach the goals.

2. Principles of Primacy of Planning:

This principle states that planning is the first or primary function of every manager. He has to
plan first and then proceed to carry out other functions. Other managerial functions are organized
to reach the objectives set in planning.

3undertaken. Plans are, generally not properly structured. The reason being that planning
premises are not properly developed. This principle lays emphasis on properly analysing the
situation which is going to occur in future.

4
4. Principle of Alternatives:

Planning process involves developing of many alternatives and then selecting one which will help
in achieving desired business goals. In the absence of various alternatives proper planning will
be difficult. . Principle of Planning Premises: In order to make planning effective, some premises
or presumptions have to be made on the basis of which planning has to be

5. Principle of Timing:

Plans can contribute effectively to the attainment of business goals if they are properly timed.
Planning premises and policies are useless without proper timing.

6. Principle of Flexibility:

This principle suggests flexibility in plans if some contingencies arise. The plans should be
adjusted to incorporate new situations. The dangers of flexibility should be kept in mind. The
changes may upset the earlier commitments. So the cost of changes should be compared to the
benefits of flexibility.

7. Principle of Commitment:

There should be a time frame for meeting the commitments made. This will ensure the achieving
of targets in time.

8. Principle of Competitive Strategies:

While formulating own plans a manager should keep in mind the plans of competitors. The plans
should be framed by thinking of what the competitors will do in similar situations

Characteristics of a Good Plan

(a) Clear Objective

(b) Proper Understanding
(c) Comprehensive
(d) Flexible
(e) Economical

5
 STRATEGIC PLANNING CYCLE

Where do we want to go?

How can we improve?

How do we get there?

How did we do?

Planning can be
defined as thinking in advance what is to be done, when it is to be done, how it is to be done and
by whom it should be done. In simple words we can say, planning bridges the gap between where
we are standing today and where we want to reach.

Planning involves setting objectives and deciding in advance the appropriate course of action to
achieve these objectives so we can also define planning as setting up of objectives and targets and
formulating an action plan to achieve them.

Planning Process

Planning is the first primary function of management that precedes all other functions. The
planning function involves the decision of what to do and how it is to be done? So managers focus
a lot of their attention on planning and the planning process. Let us take a look at the eight
important steps of the planning process

Gather
Set Goals
Data

Mornitor Analyze
Plan Data

Implement Create
Plan Plan

(a) Recognizing Need for Action

6
(b) Setting Objectives
(c) Developing Premises
(d) Identifying Alternatives
(e) Examining Alternate Course of Action
(f) Selecting the Alternative
(g) Formulating Supporting Plan
(h) Implementation of the Plan

Step # 1. Perception of Opportunities:

Perception of opportunities is not strictly a part of the planning process. But this awareness of
opportunities in the external environment as well as within the organisation is the real starting
point for planning. It is important to take a preliminary look at possible future opportunities and
see them clearly and completely.

Step # 2. Establishing Objectives:

This is the second step in the planning process. The major organisational and unit objectives are
set in this stage. This is to be done for the long term as well as for the short range. Objective specify
the expected results and indicate the end points of what is to be done, where the primary
emphasis is to be placed and what is to be accomplished by the various types of plans.

Step # 3. Planning Premises:

After determination of organisational objectives, the next step is establishing planning premises
that is the conditions under which planning activities will be undertaken. Planning premises are
planning assumptions the expected environmental and internal conditions.

Step # 4. Identification of Alternatives:

The fourth step in planning is to identify the alternatives. Various alternatives can be identified
based on the organisational objectives and planning premises. The concept of various
alternatives suggests that a particular objective can be achieved through various actions.

Step # 5. Evaluation of Alternatives:

The various alternative course of action should be analysed in the light of premises and goals.
There are various techniques available to evaluate alternatives. The evaluation is to be done in
the light of various factors. Example, cash inflow and outflow, risks, limited resources, expected
pay back etc., the alternatives should give us the best chance of meeting our goals at the lowest
cost and highest profit.

Step # 6. Choice of Alternative Plans:

This is the real point of decision-making. An analysis and evaluation of alternative courses will
disclose that two or more advisable and beneficial. The fit one is selected.

Step # 7. Formulation of Supporting Plan:

After formulating the basic plan, various plan are derived so as to support the main plan. In an
organisation there can be various derivative plans like planning for buying equipment, buying

7
raw materials, recruiting and training personal, developing new product etc. These derivative
plans are formulated out of the basic or main plan and almost invariably required to support the
basic plan.

Step # 8. Establishing Sequence of Activities:

After formulating basic and derivative plans, the sequence of activities is determined so those
plans are put into action. After decisions are made and plans are set, budgets for various periods
and divisions can be prepared to give plans more concrete meaning for implementation.

Types of Plans

• Involves analyzing competitive opportunities &

threats, as well as the strengths & weaknesses of the
Strategic plans organization, & determining how to position the
organization to compete effectively in their
environment.

• Creates the blueprint for the lager strategic plan.

These plans are often short term and are carried out
Tactical plans by middle- level managers.

•Covers the entire organization's goals & objectives

and puts into practice the ways & action steps to
Operational plans achieve the strategic plans. Very short term plans,
usually less than a year.

Strategic Plans

 It is the determination of the long-term objectives of an enterprise, the action plan to be

adopted and the resources to be mobilized to achieve these goals.
 Since it is planning the direction of the company’s progress, it is done by the top management
of an organization.
 It essentially focuses on planning for the coming years to take the organization from where it
stands today to where it intends to be.
 The strategic plan must be forward looking, effective and flexible, with a focus on
accommodating future growth.
 These plans provide the framework and direction for lower level planning.

Tactical Plans

Tactical plans describe the tactics that the managers plan to adopt to achieve the objectives set in
the strategic plan.

 Tactical plans span a short time frame (usually less than 3 years) and are usually developed
by middle level managers.

8
  It details specific means or action plans to implement the strategic plan by units within each
division.
 Tactical plans entail detailing resource and work allocation among the subunits within each
division.

Operational Plans

Operational plans are short-term (less than a year) plans developed to create specific action steps
that support the strategic and tactical plans.

 They are usually developed by the manager to fulfill his or her job responsibilities.
 They are developed by supervisors, team leaders, and facilitators to support tactical plans.
 They govern the day-to-day operations of an organization.

Operational plans can be:-

 Standing plans − Drawn to cover issues that managers face repeatedly, e.g. policies,
procedures, rules.
 Ongoing plans − Prepared for single or exceptional situations or problems and are normally
discarded or replaced after one use, e.g. programs, projects, and budgets.

Meaning of Planning Premises

Planning is made for the future. Future is uncertain the management makes certain assumptions
about the future. The assumptions are not to be based on hunch or guess work. It should be
developed through scientific forecasting of future events.

Planning premises are the anticipated environment in which plans are expected to operate. They
include assumptions or forecasts of the future and known conditions that will affect the course of
plans such as prevailing policies and existing company plans that controls the basic nature of
supporting plans.

Types of Planning Premises:

Planning premises may be classified as:-

(a) Internal and external

(b) Tangible and Intangible
(c) Controllable, semi-controllable and uncontrollable
(d) Constant and variable
(e) Foreseeable and unforeseeable

Types of Planning Premises

Internal and External Premises

(a) Internal Premises come from the business itself. It includes the skills of the labor force,
investment policies of the company, management style, sales forecasts, etc.
(b) External Premises come from the external environment. That is economic, technological, social,
political and even cultural environment. External premises cannot be controlled by the
business.

9
 Controllable, Semi-controllable and Uncontrollable Premises

(a) Controllable Premises are fully controlled by the management. They include factors like
materials, machines, and money.
(b) Semi-controllable Premises are partly controllable. They include marketing strategy.

Uncontrollable Premises as the name suggests are those over which the management has
absolutely no control. Take for example weather conditions, consumer behavior, natural
disasters, wars, etc.

9 Major Barriers to Planning | Management

Barriers to Strategy Barriers to How to Remove

Formulation Strategy Barriers?
Implementation
Identical procedures Lack of Clear
accountability Communications
Strict limitations Lack of commitment Manage the Change
Process
People Inadequate Participation of
instructions employees
Emphasized to employees in planning process
ceremonial work Power & Influence: Regular checks
Limited discussion Culture Accountability

Identifying Barriers to Planning

 Inability to plan or inadequate planning

 Lack of commitment to the planning process
 Inferior information
 Focusing on the present at the expense of the future
 Too much reliance on the organization's planning department
 Concentrating on controllable variables

Overcoming the Barriers to Planning

 Way # 1. Starting at the Top

 Way # 2. Recognizing the Limits to Planning
 Way # 3. Communication
 Way # 4. Participation
 Way # 5. Revision and Updating
 Way # 6. Contingency Planning

Strategic Planning

Strategic planning is an organization’s process of defining its strategy or direction and making
decisions on allocating its resources to pursue this strategy, including its capital and people.

Strategic planning is a process to determine or re-assess the vision, mission and goals of an
organization and then map out objective (measurable) ways to accomplish the identified goals.
10
 Defining Mission Statement:

The mission statement is a short, concise statement that describes what the organization will
strive to bring about — the reason why the company exists in terms of its impact on the rest of
the world.

Defining Vision Statement:

One of the functions of strategic planning is to inspire people in the organization to work towards
the creation of a new state of affairs. The vision is a means of describing this desired future, but
it works best to inspire and motivate if it’s vivid — in other words, a vision should be a “picture”
of the future. The visioning process is usually the very first step in the strategic planning process.

Strategic Planning – Features

(a) Process of Questioning

(b) Time Horizon
(c) Pervasive Process
(d) Focus of Attention
(e) Continuous Process
(f) Co-ordination

Strategic Planning – Approaches

1. Bottom-Up Approach:

Initiatives in formulating strategy are taken by the various units or divisions of an organization
and then passed upward for aggregation at the corporate level. Corporate strategy will then be a
composite of these plans. The weakness of this approach is that corporate strategy may end up
as an incoherent muddle that merely reflects the objectives of the divisions before the planning
attempt was made.

2. Top-Down Approach:

Initiative is taken by the upper-level executives of the organization, who formulate a unified,
coordinated strategy, usually with the advice of lower-level managers. This overall strategy is
then used to establish objectives and evaluate the performance of each business unit.

3. Interactive Approach:

This approach is a compromise between the bottom-up and top-down methods, corporate
executives and lower-level managers develop strategy in consultation with each other, making a
link between wider corporate objectives and the managers’ detailed knowledge of specific
situations.

4. Dual-Level Approach:

Strategy is independently formulated at both the corporate and business levels. All units form
plans which suit their particular situations, and these plans are regularly reviewed by corporate
management. At the corporate level, strategic planning is continuous and focuses on the larger
goals of the organization- when to acquire and when to divest businesses; how to react to

11
competition and the external environment; what priorities to attach to the organization’s various
units.

Forecasting

Forecasting is essentially a process of analyzing the past and present business movements and
trends to obtain some idea or clues regarding future trends and business movements. Forecasting
is looking into the future so that we can accordingly plan for it.

However, forecasting is not a haywire process. It is a systematic approach with well thought-out,
scientific methods and procedures. It involves a thorough and proper analysis of data and facts
with the help of both quantitative and qualitative techniques.

12
SUMMARY OF PLANNING

Planning is the foundational pillar of management, serving as the initial step in the managerial
process. Managers engage in planning to delineate organizational objectives and distribute
resources effectively toward achieving these objectives. By defining the future functions of
management, planning acts as a precursor to subsequent managerial activities.

Business planning encompasses setting objectives and formulating action plans to attain these
objectives. This process provides clarity and direction for managers and employees, answering
critical questions such as what needs to be done, how, when, and by whom. Importantly, it sets a
clear vision for organizational efforts.

In planning, managers must consider various aspects, including what tasks need to be
accomplished, the methodologies for accomplishing them, the timing of execution, and the
responsible parties. Through effective planning, several benefits emerge, including providing
direction, reducing uncertainty, curbing improvidence, stimulating innovation, easing decision-
making, and establishing standards.

However, planning also comes with limitations, such as rigidity, challenges in dynamic
environments, potential creativity reduction, costliness, and imperfect accuracy.

The planning process unfolds through several steps: determining objectives, conducting research,
exploring alternative solutions, making policy decisions, and executing the chosen plan. Planning
is characterized by its intellectual nature, primacy in managerial functions, universality across
managerial levels, rational approach, focus on objectives, promotion of efficiency and economy,
facilitation of coordination, and flexibility.

The "Six P’s of Planning" encompass purpose, philosophy, promise, policies, plans, and priorities,
providing a comprehensive framework for effective planning. Additionally, planning by
objectives, also known as Management by Objectives (MBO), offers a systematic approach to
aligning organizational goals with individual and team objectives, fostering collaboration,
performance measurement, employee development, and continuous improvement.

The principles of planning emphasize contributions to objectives, the primacy of planning, the
rationality of the approach, focus on objectives, efficiency and economy, coordination, flexibility,
and commitment. A good plan exhibits characteristics like clear objectives, thorough
understanding, comprehensiveness, flexibility, and economy.

The planning process involves recognizing the need for action, setting objectives, establishing
planning premises, identifying alternatives, evaluating alternatives, choosing the best alternative,
formulating supporting plans, and implementing the plan. Strategic planning guides an
organization's direction and resource allocation, involving the formulation of long-term
objectives and action plans.

Approaches to strategic planning include the bottom-up, top-down, interactive, and dual-level
methods, each offering unique advantages and challenges. Forecasting complements planning by
analyzing past and present trends to predict future business movements systematically,
employing quantitative and qualitative techniques for informed decision-making.

13
In summary, planning serves as the cornerstone of effective management, providing direction,
clarity, and purpose to organizational endeavors while navigating through uncertainties and
challenges to achieve defined objectives.

14