Planning

Nature of Planning
Most basic function of Management.
Planning sets all other functions into action.
Its an intellectual process which requires manager to think before

acting.
Thinking in Advance
Manager think, what is do be done?, when?, how?, and whom to do

it?.
Decision making is integral part of planning.
Decision making is defines as a process of choosing among

alternatives. Eg: deciding which goal to pursue is the most important

part of planning process.

Nature of Planning
Planning is a continuous process
A manager should be like Navigator.
He must constantly monitor the conditions, both within and outside

the organisation to determine if changes are required in his plans.

This is called Principles of Navigational Change.
Thus a plan must be flexible in atleast 5 major area. Viz: technology,

market, finance, personnel and organisation.

Flexibility is possible only within limits (because it involves extra

cost)
Sometimes it may be so expensive that its benefit may not be worth

the cost.

Nature of Planning
Resistance to change (in planning)
Irretrievable costs (fixed assets, training, advertising etc)
may block flexibility.
Planning is an all-pervasive function (planning is important
to all managers regardless of their level in the orgn).
However some differences are there in the involvement by
managers at different levels. (time period covered)
Top management planning for longer duration
Lower level managers day / week / monthly plan.
Top mgmt develop plan, lower level mgmt execute plan.

Importance of Planning
Minimizes Risk and Uncertainty:
By providing a more rational , fact based procedure
for making decisions, planning allow managers and
organizations to minimize risk and uncertainty.
Planning help the manager to cope with and
prepare for the changing environment.
Manager has being in control if he has anticipated
some of the possible changes and has planned for
them. (eg: Umbrella)

Importance of Planning
Leads to success:
Planning does not guarantee success. But
often planned companies not only out
perform the unplanned companies but also
out perform their own past results.
Eg: Military attack.
Planning proacts.

Importance of Planning
Focuses attention on the Orgn Goal:
Planning makes it easier to apply and coordinate the
resources of the organisation more effectively.
It also helps the manager to prepare sequence of
steps in achieving goals without overlapping.

Facilitates control:
The manager sets goals/plans which are the
benchmarks against which the goals are measured.
Control can be exercised only if there are plan.

Forms of Planning
Simple to complex form
Planning can be done by using experts with sophisticated
forecasting technique or seat of the pants manner.
Planning: Top-down approach and bottom up approach.
Planning can be done using participative or elitist method.
Thus there are many forms and types of planning and it vary
from organisation to organisation.
Usual way of classification is strategic and tactical planning.

Forms of Planning
Strategic planning: deciding the major
goals of the entire organisation and
policies to attain the goals.
It deals with the question such as
What business should the organisation be in a
decade from now?
What should the organisation look like in the
five years?

Forms of Planning
Tactical planning: deciding how the resources
of the orgn are used to attain the strategic goal.
It deals with the question such as
What should the levels of our operations be a year
from now?
How should we adjust our marketing strategy?
What are our short term financial and personnel
goals?

Strategic Planning

Tactical Planning

Decides the major goals and

policies of allocation of resources to
achieve these goals

It decides the detail use of

resources for achieving each goal

Done at higher levels of

management

Done at lower levels of

management

Long term

Short-term

Based on long-term forecast like

technology, political, environment
etc and is more uncertain

Based on the past performance of

the organization and is less
uncertain

Less detailed because it is not

involved in the day to day
operations of the organisation

More detailed because it is involved

with the day-to-day operations of
the organisation.

Types of Plans
Objectives

strategies

For Non
Repetitive
Activities

Single Use
plans
(Programmes
and Budgets)

For repetitive
activities

Standing Plans
(Policies,
Procedures,
Methods and
Rules)

Objectives
Goals or aims or specific targets for organisation to achieve.
It is the end point or pole-star towards which all management functions
are directed.
Objectives are distinguished from 2 other words Purpose and Mission.
Purpose primary role defined by society in which it operates.
Purpose is a broad aim applies to all organisations of the industry (eg;
Universities, hospitals etc.,)
Mission unique aim for the organisation alone. It is the organisation
specialization in some area. (service, product or client)
Objectives are the translation of organisational mission which results
can be measured. Eg: (no. of. Women students admitted in university)

Characteristics of Objectives

Objectives are multiple in number: Peter Drucker says

organisation should establish goals in each area vital for
its existence. He designed eight key result areas which are
not only relevant to profit oriented organisation but also to
non profit organisation.

Market Share

Innovation

Productivity

Physical and Financial Resources

Profitability

Manager Performance and development

Employee Performance and attitude

Social Responsibility

KRA
s

Characteristics of Objectives
Objectives are either tangible or

intangible:
Objectives have a Priority
Objectives are generally arranged in

hierarchy (means-end hierarchy)

Objectives sometimes clash with each

other (sub-optimization of goals)

Requirements of Sound Objectives

Objectives must be clear and acceptable
Objectives must support one another.
Close-knit relationship between short-range and long-range objectives.
Short range plans are the part of long range plans.

Objectives must be precise and measurable.

Helps to guide us with the ways to how to achieve it.
Motivators of people than general goals.
Helps to set up goals for lower management.
Helps to measure as per the planning, but some times cannot be measured
directly.
Eg: employee absenteeism and commitment.

Objectives should always remain valid (frequent review by managers).

Advantages of Objectives
Basis for planning and for developing other plan
such as policies, budgets and procedures.
Motivators for individuals and departments.
Eliminate haphazard actions.
Facilitate coordinated behavior
Basis for managerial control
Facilitates better management
Lessen misunderstanding and conflicts.

Strategies
Goals should be logical by considering the
environmental opportunities and treats, strengths
and weakness of the organisation.
A corporate strategy is a plan which takes these
factors into account and provides an optimal match
between the firm and the enviroinment.
2 important activities in strategies formulation are
Environmental appraisal
Corporate Appraisal

Environmental Appraisal
Political and Legal Factors:
Stability of the government and its political philosophy
Taxation and industrial licensing laws
Monetary and Fiscal Policy
Restrictions on capital investment, repatriation of capital, trading
etc.

Economic Factors:
Level of economic development and distribution of personal
income
Trends in prices, exchange rates, balance of payments etc.
Supply of labour, raw material, capital etc.

Environmental Appraisal
Competitive Factors:
Identification of principle competitors
Analysis of their performance and programmes
Anti-monopoly laws and rules of competition
Protection of patents, trade marks, brand names and other
industrial property rights.

Social and Cultural Factors:

Literacy level of population
Religious and social characteristics
Extent and rate or urbanization
Rate of social changes.

Corporate Appraisal
Strengths and weakness of the company
Strengths:
Outstanding leadership, excellent product design, low-cost
manufacturing skills etc.,
Thus formulating a strategy is like a beauty contest.

This is called planning mode of formulating strategy.

There are two other modes also: Entrepreneurial and
adaptive mode.
Entrepreneurial mode proactive
Adaptive mode reactive (for problem solving)

Standing Plans
Policies: guidelines for decision making.
As per George R. Terry, policy is a verbal, written or
implied overall guide, setting up boundaries that supply
the general limits and direction in which managerial
action will take place
Policies deal with how to do.
Eg: recruitment policy, advertisement policy, distribution
policy etc.,
Objectives are end points of planning (destiny)
Policy channelizing decisions towards these ends (route).

Advantages of Policies
Policy ensures uniformity and predictable actions
Speed up decisions at lower level because
subordinates need not consult their supervisors
frequently
Helps supervisor to delegate more authority to
his subordinates (because whatever decisions
subordinates make will be within the policy)
It gives practical shape to objectives.

Types of Policies
Policies are classified on the basis of sources, functions and
organisational strucure
Classification on the basis of sources
Originated appealed

implied

externally imposed

Originated policies:
Policies established formally and deliberately by top managers
Set down in print and embodied in a manual
Appealed policies:
Developed based on the appeal made by the subordinate to his
superior regarding manner of handling a given situation. Eg:
discounts.

Types of Policies
Implied policies:
Policies neither in writing nor verbal. Only by

watching the actual behavior of the supervisor.

Externally imposed policies:
Policies imposed on business by external

agencies such as government, trade association

and trade unions.
Eg: policy by govt on regulating prices.

Types of Policies
Classification on the basis of Functions
Production

Sales

Finance

Personnel Policy

Classification on the basis of organizational level:

Policies based on hierarchy.
Guidelines for effective policy making:
Written and understood
Should reflect the objectives
Supervisor and subordinate participation.
Policy should have reasonable balance between stability and flexibility
Different policies should not pull in different directions
Policy must be comprehensive to cover many contingencies as possible
Should be periodically reviewed.

Procedures
Policies are carried out by means of more detailed guidelines called
procedures.
A procedure set of instructions for performing a sequence of actions
involved in doing a certain piece of work.
Eg: procedure for recruitment.
Difference between policy and procedure:
Policies guides for people at higher level, procedures guides for people at
lower level.
Policies for fulfilling the objectives, procedures for implementing policies
Policies broad, procedures specific with definite acts.
Policies no work study analysis, procedures through work study analysis.

Advantages of Procedures
Standard way of performing a job.
Work simplification, elimination of unnecessary steps and
overlapping.
Control over performance.
Providing knowledge to employee about the entire range
of work.
Limitations:
Prevents innovation and improvement or work
performance this can be eliminated by periodical
improvement in procedure.

Methods

Component part of procedure.

For performing a particular step of procedure the organization may have

number of methods.

A better and more economical method of operation is needed because of

competition.

Improving the methods, reduce fatigue, better productivity and lower

costs can be achieved.

Methods can be improved in number of ways.

Manual methods mechanical means

Unproductive efforts can be identified using motion study.

Rules:

Detailed and recorded instructions that a specific action must or must not
be performed an a given situation.

Single use plans

Programmes:

Precise plans or definite steps in proper sequence which need to be taken

to discharge given task

It also said as, all the activities necessary for achieving a given objective

Eg: opening 5 new branches

Essential ingredients of every programme are

a) time phasing

b)

budgeting
Budgets:

Plan for future period of time containing statements of expected results

in numeric terms (financial / quantitative statements)

ie: rupees, man-hours, product units etc.

Important budgets are sales budget, production budget, cash budget,
revenue and expense budget.

Steps in Planning
1 ) Establishing verifiable goals or set of goals to be achieved:

Define enterprise objectives

Type of goal selected will depend on a number of factors

Basic mission of the organisation
Values its managers hold
Actual and potential abilities of the organisation

2) Establishing Planning premises:

Certain assumptions about the future on the basis of which the plan will be
ultimately formulated

Eg: population trends, economic conditions, probable competitive behaviour

Planning premises can be variously classifies as under:

Internal and external premises
Tangible and intangible premises
Controllable and un-controllable premises.

Steps in Planning

Internal sales forecast, investment in plan and equipment, labour

force

External: business environment, factors influencing the demand for

the product. Factors affecting resources available to the enterprise

External premises may include:

General business and economic envt

Technological changes

Govt policies and regulations

Population growth

Political stability

Sociological factors

Demand for industrys product

Steps in Planning
Tangible and Intangible resources:

Measurable and immeasurable

Controllable and non-controllable premises:

Uncontrollable strikes, wars, natural calamities, legislative etc.

Controllable factors advertising policy, skills of labour force etc.

3 ) Deciding the planning period:

Yearly plan decades plan

Factors which influence the choice of a period:

Lead time in development and commercialization of a new product

Time required to recover capital investments or pay back period

Length of commitment already made.

Steps in Planning
4) Finding alternative course of action:
5) Evaluating and selecting a course of action:

Using quantitative techniques and operations research

6 ) Developing derivative plan:

Goals breakdown day to day opeerations

Plan done for subunits by lower level managers ( more similar to op

level managers) by assessing SWOT at subunit level

7) Measuring and controlling the progress

To take remedial action if necessary to make the plan work

Change the original plan if it is unrealistic.

Limitations of Planning
Its an expensive and time consuming
process.
Sometimes restricts the organization to the
most rational and risk free opportunities.
It may cause delay in decision making.
The scope of planning is limited in the case
of organisations with rapidly changing
situation

Making Planning Effective

Coordination
Communication
Participation (MBO, Bottom up Planning,
committees & clubs)
Proper Climate