Planning

Nature of Planning

QUESTION OBJECTIVE OF THE QUESTION

Where are we now? To determine the organization

strength & weaknesses

Where do we want to go? To determine the organization

objectives

How can we go there? To determine the ways to achieve

the above objectives
Definitions of Planning
 According to Billy E. Goetz
 “Planning is fundamentally choosing and planning a problem,
arise when an alternative course of
actions are discovered.”
 According to Harold Koontz
 “Planning is the function of a manager, which involves the
selection of objectives, policies, procedures & programmes from among
alternatives. It is, thus decision making affecting course of an enterprise or
a department.”
 According to George R. Terry
 “Planning is a method/technique of looking ahead & a
constructive reviewing of future needs so that present action can be
adjusted in view of the established goals.”
Nature/Characteristics/Feature of Planning

 Planning is a primary function of management: It is most

basic function of management as all other functions of
management depends of planning.
  
 Planning is an intellectual process: It is a mental exercise

& requires capability of imagination & foresight.

  
 Planning is a Continuous function: It is an ongoing

process, in order to attain organizational goals, old plans

are continuously revised & new plan are continuously
developed.
  
Nature/Characteristics/Feature of Planning

 Planning is a Pervasive Function:

 (a) It is the base of all other managerial function that is all the other
managerial function such as organizing, staffing etc, are based on planning.
 (b) It is the function of each & every manager &, therefore it is done at all
levels of management.
 (c) It is an essential function of management.
 
 5. Planning involves forecasting: As the plans are made for future, so
forecasting is the essential of planning.
 
 6. Planning involves choice-making: It involves selection or choice of best
alternatives. If this is only one way of doing things, then there will be no need
of planning.

 7. Planning is goal oriented process: A sound planning clearly states not only
where to go, but also how to go these, so it is treated as a goal-oriented
process.
 
Importance, Objectives, Advantages, Significance of Planning

 A poem of Rudyard Kipling tells a optimist

future of planned course of action,
“I keep six honest serving men,
They taught me all I know,
Their names are What & Where,
When & How and Why and Who.
Importance, Objectives, Advantages, Significance of Planning

 Focus on Attainment of objectives & goals: Integrated &

purposeful action is more easily achieved with the help of
planning. Unproductive work & waste of resources can be
minimize due to effective planning.
 
 Reduction in risk & uncertainty: These 2 elements cannot be
eliminated, but they can be reduced by way of planning.
Through careful planning, crisis can be anticipated & mistakes
or delays can be avoided.
 
 Helpful in decision Making: Planning enables the systematic &
thorough investigation of alternative methods of a problem.
Thus, planning helps in a selection of best alternative to solve
any business problem.
Importance of Planning
 To Help in Control: It provides a basic for effective control. Planning &
control go hand in hand. Under planning, we have standards of performance,
which are reflected in the forms of goals or targets. Under controlling, the
actual performance is compared with the planned performance and reasons
are found out for any deviation, if any.
 
 Reduction in chaos & Biasness: Under planning, the goals, policies, procedure
etc are set in advance & all activities are coordinated & and directed along the
pre-determined channels. Hence, there is no chance of confusion or chaos.
 
 To Increase organizational Effectiveness: The concept of effectiveness is that
the organization is able to achieve its objectives within the given resources.
Thus, for effectiveness, it is not only necessary that resources are put to the
best of their efficiency but also that they are put in a way which ensures their
maximum contribution to organizational objectives. In fact, this can be done
by taking appropriate planning.
 
Steps in Planning

 1. Perception of opportunities
 not strictly a planning process.
 awareness is very important for planning process because it provider

clue whether the opportunities exist can the taken up for particular plans
 consider as the beginning of planning process.
 Perception of opportunities includes:
 A preliminary look at possible opportunities and the ability to see them

clearly and completely.

 Knowledge of where the organization stands in the lights of its strength

and weaknesses.
 An understanding of why the organization wants to solve uncertainties.
 A vision of what it expects to gain

provides an opportunity to set the objectives in real sense because the

organization tries to relate itself with the environment. In doing so, it
take the advantages of opportunities and avoids threats. Once the
opportunities are perceived to be available, the other steps of planning
are undertaken.
Steps in Planning

 2. Establishing Objectives: At this stage, major organizational & unit

objectives are set.
 Objectives specify the results expected and indicate the end points of
 – What is to be done?
 – Where the primary emphasis is to placed,
 – What is to be accomplished by the various types of plans?
 The organizational objectives should be specified in all key result areas.
 Key results are those which are important for organization in achieving
its objectives. These are identified on the basis of organizational
objective for e.g., for an organization, key result areas may be
profitability, sales, and manufacturing & so on, once organizational
objective are identified, objective of lower units and subunit can be
identified in that context.
 These, in then, control the objectives of subordinate departments, & so
on down the line. Thus there will be hierarchy of objectives in the
organization.
Steps in Planning

 3. Planning Premises: After determination of organizational goals, the

next step is establishing planning premises, that is, the condition under
which planning activities will be undertaken. Planning premises are
planning assumptions:
 -External premises like political, social, technological, govt. policies etc
 -Internal premises like organizations policies, resources of various types
etc.
 The plans are formulated in the light of both external & internal factors.
Forecasting plays a major role in planning premises e.g. what sales?
What volume? What products? What are the long-term methods?
 The nature of planning premises differs at different levels of planning.
 At the top level, it is mostly externally focused. As one moves down the
organizational hierarchy, the composition of planning premises changes
from external to internal. For Example; a superior’s plans affecting a
subordinate manager’s area of authority becomes premises for the
latter’s planning.
Steps in Planning
 4. Identification of Alternatives. Based on the organizational objectives and
planning premises, various alternatives can be identified.
 The concepts of various alternatives suggest that a particular objective can
be achieved through various actions. For Example, if an organization
objective is to grow further, it can be achieved in several ways like
expanding in the same field of business and product line, joining hands
with other organization, taking over another organization & so on. Within
each category, there may be several alternatives.
 The most common problem with alternative is not that finding of
alternatives only but to reduce the number of alternatives so that most
promising ones may be taken for detailed analysis is perfect for all this
alternative or analysis of all the alternatives can be done, close the best
alternative & make a preliminary criteria that under this criteria alternative
will be selected.
 For Example; one company has defined preliminary criteria in terms of size
of investment in new project and may not consider any project involving
investment of less than Rs.40 crores.
Steps in Planning
 5. Evaluation of Alternatives. Various alternatives which
are considered in terms of preliminary criteria may be
taken for detailed evaluation. This stage, an attempt in
made to evaluated how each alternative contributes to
the organizational objectives in the light of its resources
& constraints.
 Here the problem arise, an each alternative may have
positive points on one aspect but negative on others.
 For Examples; one alternative may be most profitable
but requires heavy investment; another may be less
profitable but with less risk. Moreover, there is no
certainty about the outcome of any alternative because it
is related with future and future is not certain
Steps in Planning
 6. Choice of Alternatives. After the evaluation of
various alternatives, the fit one is selected.
 Sometimes the evaluation shows that more than
one alternative is equally good. In such a case, a
planner may choose more than one alternative.
 Sometimes, the alternative which has selected for
the course of action, can be change due to the
change in planning premises therefore, for that a
planner must be ready with others alternative,
normally know as contingency plan, which can be
implemented in changed situations.
Steps in Planning
 7. Formulation of Supporting Plan. After formulating the
basic plan, various plans are derived so as to support the
main plan. In an organization there can be various derivative
plans like planning for buying equipments, buying raw
materials, recruiting and training personnel, developing new
product, etc. These derivative plans are formulated out of
the main plan and, therefore, they support it.
 
 8. Establishing sequence of activities. After formulating basis
& derivative plans, the sequence of activities is determined
so that, plans are put into action based on plans at various
levels, it can be decide who will do what & at what time.
Types of Plans

 Plan: A plan is a commitment of resources to

a particular course of action believed
necessary to achieve specific results.
 Plan may be classified in two ways;
 Standing Plans & Single-Use Plans
 or Strategic Plans & Operational Plans.
Types of Plans

 I a) Standing Plans: It provides guidelines for further

course of action and is used over a period of time.
Once formulated, these plans are in operation for a
long period unless there is a change in plan.
 Examples: organizational mission, long term
objectives, strategies, policies, procedures and rules.
 b) Single-Use Plans: These are relevant for a specified
time and after the lapse of time, these plans are
formulated again for the next period.
 Examples: projects, budgets, quotas, targets etc.
Generally these plans are derived from standing plans.
Types of Plans
 II a) Strategic Plans: These are major ones which defines the long
term course of action for an organization in the light of its
environment.
 Examples: organizational objectives for long term period, major
policies and strategies.
 b) Operational Plans: These strategies which are put into action
plans are implemented through various operational plans, both
major and minor to achieve within a specified period.
 Examples: budgets, projects, minor plans are in form of quotas
and targets to achieved within a specified period.
 Various organizational plans are interlinked and may be arranged
in a hierarchy in which a higher order plans to derive a lower
order plan. In the reverse direction, a lower order plan contributes
to the achievement of the objective a higher order plan.
Types of Plans

 Hierarchy of organizational Plans

 1) Mission or Purpose: The mission indentifies the basic function or task
of an enterprise or agency or any part of it. Every kind of organized
operation has or at least should have if it is to be meaningful a purpose or
a mission.
 Example: The purpose of a university is teaching, research and providing
service to the community.
 2) Objectives or Goals: Every organization has its own objectives and
goals which reveal the purpose for which the organization is established.
 All activities of the organization are directed towards the accomplishment
of the objectives and the goals. They serve as the foundation of the entire
management process of the planning till controlling. Strategies, plans,
policies are made to within the framework of objectives and goals.
 Example: The company should hold the No. 1 position in the market for
all its brands otherwise quit the market.
Types of Plans

 ) Strategies: It is defined as the determination of the basic

long term objectives of an enterprise and the adaption of
courses of action and allocation of resources necessary to
achieve these goals.
 Example: Reliance Indian Scheme is a long term profit gain
strategy.
 4) Policies: They are the general statements which guide the
thinking of the subordinates at the time of decision making.
It determines the limits, within which the decisions can be
made by the subordinates.
 Example: An organization may have employment policy to
give equal job opportunities to man and woman. So at the
time of appointment employees the ratio between male and
female shall be guided by the above policy.
Types of Plans
 5) Procedures: It describes what action to be
taken in particular situation. It lays down the
sequence in which actions are to be taken.
 Example: Generally big organization has their
procedure to handle the goods supplied by the
supplier.
 6) Rules: They are specific statements which
should or should not be done in a particular
situation.
 Example: Keep to the left, No Smoking in the
factory area.
Types of Plans
 7) Programs: These are a complex of goals, policies,
procedures, rules, task assignment, steps to be taken,
resources to be employed and other elements to carry
out a given course of action.
 Example: Menu, scheme, course, curriculum, syllabus
 8) Budgets: It is a statement of expected expressed in
a numerical terms. It may be called a “numberized”
program. A budget may be expressed in financial
terms, in terms of labour-hour per units of product, or
machine hours or in any other numerical terms.
 Example: funds, means of resources
Management of Objectives (MBO)

 The term MBO was coined by Peter Drucker in 1954 who

stressed upon the need for management of objectives and
self-control”.
 It is a technique of motivating managers at all levels in an
organization toward achievement of organizational goals
and also their personal goals.
 MBO or management by results has drawn attention
because of two reasons:
 1) It focuses sharply on the objectives or results which a
manager is expected to achieve within a specified period.
 2) It emphasizes participative management, an approach
which provides high motivation to individuals in
organizations.
Definition of MBO

 “MBO is a result-centered, non-specialist,

operational managerial process for the
effective utilization of material, physical and
human resources of the organization by
integrating the individual with the
organization and organization with the
environment”.
Process of MBO
Organizational Purpose &Objectives Planning Premises

Key Results Area

Superiors Objectives

Superior Recommendations for Subordinate statement of

Subordinates Objectives his objectives

Matching Resources Subordinate’s agreed Objectives

Subordinate’s Performance

Performance Review and Appraisal

Recycling Aspect of MBO

Objective Setting

Action Planning

Performance Review
Benefits of MBO
 1) Better Managing: MBO helps in better managing the organizational resources and
activities. Resources and activities are put in such a way that they result into better
performance. These are five basic assumptions about what improves performance such
as:
 a) Clarity of objectives: Peoples do better when they know what exactly they have to do
because they can focus their attention exactly at where it is required.
 b) Role Clarity: Clarity of roles, includes the area of responsibility and authority, leads to
improved performance. This helps the manager to appreciate his own contributions as
well as the contribution of others who are directly related to him.
 c) Periodic Feedback of performance: Periodic review helps in better performance by
giving feedback about one’s action and its result. Existence of objectives without a
system of review of performance is useless. Periodic review provides opportunities for
taking stock of the situation and planning future course of action. Periodic review of
performance is an integral part of MBO.
 d) Participation by managers in management process: Participation decides commitment
of people and motivates them. They have a sense of feeling that they are achieving their
own objectives. This commitment enhances the chances of getting better performance.
 e) Realization that there is always scope for improvement in every situation: MBO
provides the base of philosophy that there is always scope for improved performance.
This feeling is provided by MBO because objectives are evaluated very frequently and
managers become keen for setting performance at higher level because of their
motivation and commitment. Thus, performance can improve in 4 different ways i.e.
decreased time, decreased resources, increased quality and increased quantity.
Benefits of MBO

 2) Clarity in Organizational Action: MBO tends to provide the key results area
(KRAs) where organizational efforts are needed.
 objectives are defined very clearly they help in relating the organization with its
environment.
 A key factor in objective setting in the internal and external environment in
which the organization operates.
 leads to define the organization properly in the environmental context as well
as in the context of its various competitors.
 3) Personnel Satisfaction: MBO provides greatest opportunity for personnel
satisfaction.
 This is possible because of 2 related phenomena i.e. participation in objective
setting and rational performance appraisal.
 When the individuals are involved in objective setting, they derive satisfaction
because of the feeling that they are important to the organization. They enjoy
considerable authority which is a source of inspiration for better performance.
 4) Basis for organizational Change:
 provides a framework for organizational change, enabling the top management
to initiate, plan, direct and control the direction and speed of change.
Problems and Limitations of MBO

 1) Time and Cost: MBO is not as simple as it looks to be. It is a process which
requires large amount of time of the senior managers.
 This is particularly at the initial stage when MBO is seen something over and above
the normal work, due to which the manager gets frustrated and feel overburdened.
 Further, MBO generates paper work because large number of forms to be designed
and put into practice. Indirectly, costing also increasing and a problem of
communication overload arise. Once MBO becomes a part of the organizational
life, this problem disappears.

 2) Failure to teach MBO Philosophy: MBO is a philosophy of managing an

organization in a new way.
 However, manager fails to understand and appreciate this new approach. They
have a number of doubts about MBO like what purpose is served by MBO, how the
performance is to be appraised and how organization will benefit.

 3) Problems in Objective Setting:

 MBO requires verifiable objectives against which performance can be measured.
However, setting such objectives is difficult at least in some areas.
 Objectives are more in the form of statement rather than in quantitative form.
Problems and Limitations of MBO

 4) Emphasis on short-term Objectives: Sometimes, in order to be more precise

there is a tendency to emphasize on short-term usually for a year or even less. No
doubt, this may help in performance appraisal but there is always danger in
emphasizing short-term objectives at the cost of long-term objectives.

 5) Inflexibility: MBO represents the danger of inflexibility in the organization,

particularly when the objectives need to be changed.
 In a dynamic environment, a particular objective may not be valid forever. In the
context of revised objective, changed premises or modified policies, it is useless
to follow the old objectives.
 However, many managers often hesitate to change objectives during a period of
time.

 6) Frustration: Sometimes MBO creates frustration among managers. This may be

because of two reasons:
 a) An experience shows, many organizations could not implement MBO properly,
resulting into utter chaos. In this case, the organization is not able even to work
with its old system.
 b) Introduction of MBO tends to arouse high expectation for rapid change,
particularly among the young and junior managers.