PRINCIPLES AND PRACTICES OF MANAGEMENT

UNIT II- PLANNING

Dr. Sidhanshu Rai
Assistant Professor
Institute of Business Management,
CSJM University, Kanpur

INTRODUCTION
This unit introduces you to planning. Planning is the first of the four primary management
functions and sets the direction for an organization. It is undertaken after the mission of the
organization is defined and its goals and objectives established. It involves a set of decisions
that are required to initiate a set of activities embarked upon to achieve the goals and
objectives of the organization, consistent with its mission. The successful implementation of
policies, procedures and rules, as prescribed during the planning process, ensures the success
of the organization. Planning is required at all levels of management relative to what
managers at these levels do. Strategic planning undertaken by the top management focuses on
where the organization will be in the future; tactical planning emphasizes on how it will be
done. Operational plans are short-range plans and specify the operational aspects of the
activities. Of course, all such plans should have contingency plans to modify the existing
plans and change them, if necessary. In this unit, we will learn all about the concept of
planning in management.

PLANNING: NATURE, PURPOSE, PRINCIPLES AND

PLANNING PREMISES
A number of management thinkers have given their own definition of planning, with the
central core being that of making decisions now that will affect the future of the company. As
such the planning process has three characteristics. These are:
1. Planning is anticipatory in nature. A decision must be made now as to what to do and how,
before it is actually done.
2. Planning is a system of decisions. It involves a process of making decisions which will
define what is to be achieved in the future and the formulation of action plans for
achievement of goals.
3. It is focussed on desired future results. Planning is a means of ensuring that the important
organizational objectives are accomplished as and when desired.
Purpose of Planning
1. Planning is essential in modern business. The growing complexity of the modern
business with rapid technological changes, rapid changes in consumer tastes and growing
tough competition necessitates orderly operations not only in the current environment but
also in the future environment. Since planning takes a future outlook, it takes into ace-aunt
the possible future developments.
2. Planning is related to performance. It can be expected and there is evidence to support
the hypothesis that companies that engaged in formal planning consistently performed better
than those with no formal planning, and improved their own performance aver a period of
time. The performance was measured by such factors as return an investment, sales volume,
growth in earnings per share, etc.
3. Planning puts a focus an objectives. The effectiveness of formal planning is primarily
based upon clarity and specificity of objectives. Objectives provide a direction and all
planning decisions are directed towards achievement of these objectives. This ensures
maximum utility of managerial time and efforts.
4. Planning anticipates problems and helps in the smooth flow of operations. Since
planning is involved in forecasting the future, it minimizes the chances of haphazard and
hurried decisions. Since the needs of the organization are anticipated in advance, the proper
acquisition and allocation of resources can be planned thus minimizing wastage ensuring
optimal utility of these resources.
5. Planning is necessary to facilitate control. Since plans are made to achieve objectives,
periodic reviews of operations can determine whether the plans are being implemented
correctly. Well developed plans can aid the process of control in the following ways:
(a) Establish advanced warning of possible deviations from the expected performance. The
deviations in production, sales, profits, etc. may come to light during periodic investigations
and remedial “action can be taken.
(b) Provide quantitative data. There may be provision in plans to compare the actual
performance, in quantitative terms, concerning production of sales, with industry statistics or
market forecasts.
6. Planning helps in the process of decision-making. Since planning specifies the actions
and steps to be taken in order to accomplish organizational objectives, it serves as a basis for
decision-making about future activities. It also helps managers to make routine decisions
about current activities since the objectives, plans, policies, schedules, etc. are clearly laid
down.
Nature of Planning
A good plan can be identified by certain characteristics. Some of these characteristics are
given below:
1. A good plan is based upon clear, well-defined and easily understood objectives. General
objectives like improving morale or increasing profits are ambiguous in nature and do not
lend to specific steps and plans. If possible, objectives must be quantified for sake of
simplicity.
2. A good plan must be simple and comprehensive. It should be simple so that all employees
can grasp its significance and it can be easily put into operation. It should be detailed enough
so that it covers all aspects of the operations that are necessary to achieve objectives.
3. It should be well-balanced, but flexible. A good plan should be well-balanced so that the
existing resources are properly utilized for all functions and that short-term gains are not at
the cost of long-term gains and vice-versa. Similarly, it should be flexible enough to
incorporate any changes in these resources, if necessary. Additionally, it should be responsive
to changed conditions so that if future events do not follow the anticipation, the same plan
can be modified and adopted to the altered situation.
4. Every plan should be time-bound. Even though planning is an attempt to anticipate the
future, the time period allowed for achieving goals should be reasonable. Long-range
planning has more uncertainties built into it due to difficulty in correctly anticipating events
for a longer period of time. Hence the time period covered should be reasonable and
reasonably stable.
5. The plans should involve participation by subordinates. Planning should not be an
exclusive responsibility, of top management. Subordinates will not be responsible if a plan is
imposed upon, them. Also; subordinate participation generally ensures the sincere and serious
effort on their part to make the plan successful.
6. Characteristic of unity, planning is initiated by different managers of different divisions at
different times. It is necessary that a good plan should incorporate all these departments,
maintaining consistency, and unity of purpose at all times and focussing on the overall
objective.

A good plan strives for optimal utility of physical as well as human resources in unison and
harmony. According to David Weeing, “Planning is a two-sided affair. Planners may think
only of the formal, economic, physical, and technical resources side when they develop a
program. But if the human side is not attended to properly, then chances are that the planning
will not be successful.”
Principles of Planning
These principles are primarily based upon Gary Dressler. They are as follows:
1. Keep aims crystallized
2. Develop accurate forecasts
3. Involve subordinates in the planning process
4. The plan must be a sound one
5. Assign planning responsibility to the right people
6. Don’t be-over-optimistic
7. Decide in advance the criteria for abandoning a project
8. Keep your plan flexible
9. Review long-range plans on a short-range
10. Fit the plan to the environment.

Planning Premises
As we have seen before, planning premises refers to the forecasts or predictions about the
environment in which the plans are going to operate. They are basically assumptions or
anticipated environmental conditions.
Premises can be of varied types:
• Internal (philosophy, worker’s skills, company policies) and external premises
(cultural, technological, political environment, etc.)
• Tangible (hours of work, units of production and sale) and intangible (employee’s
attitude, morale, goodwill) premises
• Controllable (money, machine, material), Semi-controllable (advertising strategy) and
non-Controllable (natural calamities, government’s policies, consumer behaviour)
premises
• Constant (machine, money, men) and variable (union-management relationships)
premises

COMPONENTS OF PLANNING (VISION, MISSION, OBJECTIVES)

The components of planning can be best understood through the process of planning.
Planning process for all organizations is built on the framework of the statement of formal
mission, specific objectives that are established on the basis of the mission statement and the
plans that can be developed to achieve these objectives, as shown below:
The Mission and Vision
The mission of an organization is the very reason for its existence. It sets out why the
organization exists and what it should be doing. For example, the mission of a national airline
might be defined as “satisfying the needs of individual and business travellers for high-speed
transportation at a reasonable price to all the major domestic population centres.
The purpose of the mission statement is to guide managers, work units and individual
employees throughout the organization. A clear mission statement is concise, focused, worthy
imaginative and realistic.
In addition to the mission statement, managers today are increasingly recognizing the need to
have “vision” of what the organization is to become. Most leaders are expected to be
“visionary”, who can “see” beyond the obvious. Vision is general directional and
motivational guidance for the entire organization. It should have an emotional element in it.
For example, Steven Job’s vision for Apple Computer was “to make a contribution to the
world by making tools for the mind that advance mankind.” This was a compelling statement
of direction which was emotionally charged. The mission of the organization adds specificity
to vision.

Goals and Objectives

The goals of an organization are refinements of its mission. They are open-ended statements
of purpose which help describe an organization’s philosophy. Goals are more specific than
mission but address, in general, such key issues as market share, productivity, profitability,
efficiency, growth, physical and financial resources and so on. Objectives are specific
statements about anticipated end-results of any activity. They further define the organizational
goals. For example, the goal of a college may be to increase the number of students. The
objective would be to increase the number of incoming students by 5 per cent per year.
Similarly, if the goal is to increase sales, then the specific objective might be to increase sales
by 10 per cent in the first year.
Characteristics of Sound Objectives
Sound objectives should have five basic characteristics.
They should be:
1. In writing
2. Time bound
3. Measurable
4. Attainable
5. Mutually supportive
MANAGING BY OBJECTIVE (MBO)
Management by objectives was first described and advocated by Peter Drucker in 1954 in
“The Practice of Management”. He stressed that “business performance requires that each job
be directed towards the objectives of the whole business”. MBO is the philosophy of
management that emphasizes that managers and subordinates work together in identifying
and setting up objectives and make plans together in order to achieve these objectives. These
objectives should be consistent with the organization mission and goals.
MBO, also referred to as “Management by Results” or “Goal Management” is based on the
assumption that involvement leads to commitment and if an employee participates in setting
goals and objectives as well as setting standards for measurement of performance, then such
employee will be motivated to perform better and in a manner that directly contributes to the
achievement of organizational objectives.
MBO is both an aid to planning as well as a motivating factor for employees. By its proper
use, some of the planning errors can be eliminated or minimized. It is a comprehensive
system based upon set objectives in which all members participate. These objectives are
common objectives for all participants and the extent of rewards for each member would be
determined by the degree of achievement. This leads to a fair appraisal system. Additionally,
a good MBO plan involves regular face-to-face superior-subordinate communication and
hence it improves the communication network.
MBO Process
An effective MBO programme requires top management participation and support. It relies
on the participative approach to management so that managers at all levels are actively
involved. MBO programme cannot succeed if top management in unwilling to accept the
philosophy behind it where subordinates take equal part. MBO can only succeed of it has the
complete and enthusiastic support of top management.
Establish Long-Range Objectives and Plans: As noted earlier, an organization’s mission is
defined in terms of goals and objectives. In consistency with the mission and the philosophy
of the organization, long range objectives and plans are established by the top management
after thoughtful matching of the goals and resources.
Establish Specific Short-term Organizational Objectives: Short-term organizational
objectives are usually more specific and quantifiable targets, covering such areas as
marketing, productivity, profitability and so on. These short-term objectives must be
supportive of the long-range objectives and plans and must be consistent with the overall
purpose of the organization.
Establish Action Plans: These plans involve establishment of individual performance
objectives and standards. While the entire process is that of participative nature, it is at this
level that the managers and subordinates work closely in setting their individual goals. They
jointly establish objectives with them. superiors and subordinates are given sufficient latitude
to devise and implement strategies to achieve these objectives. These objectives are usually
short-range and specific and primarily indicate as to what the subordinate’s unit is capable of
achieving in a specified period of time. The subordinates must set objectives in consultation
with the individuals who comprise his unit. In this way, everyone gets involved in goal
setting.
Appraise Results: The next step is to measure and evaluate performance periodically, in
order to determine the degree of progress towards achievement of objectives. The
performance appraisal methodology should also be jointly agreed upon. These periodic
reviews can reveal if any unanticipated problems have developed. Furthermore, these reviews
will assist the manager and the subordinates to modify either the objectives or the methods, if
necessary.
Take Corrective Actions: The periodic evaluations would indicate if there are any deviations
from the performance standards expected and planned. It is left to the managers and
subordinates to take whatever action is necessary. These actions may include changes in
personnel, retraining of personnel, changes in methodologies or even changes in objectives.