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Essentials of Planning

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1 Essentials of Planning

2 What Is Planning? Planning
involves defining the organization’s goals, establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work informal planning - nothing is written down little or no sharing of goals general and lacking in continuity formal planning - written defines specific goals specific action programs exist to achieve goals © Prentice Hall, 2002

3 Reasons for Planning Set Control Standards Growing complexities
Provide Direction Reasons for Planning Rapid socio- Economic changes Need for R&D activity Planning is defining organizational goals, establishing a strategy for reaching those goals, and developing a comprehensive hierarchy of plans to integrate and coordinate activities. It can be either formal or informal, depending on the time frame and amount of documentation. Managers should plan for four reasons. First, planning coordinates effort by giving direction to managers and non-managers. Second, planning reduces uncertainty by forcing managers to look ahead, anticipate change, and develop appropriate responses. Third, planning reduces redundancy. Fourth, planning sets standards or objectives that facilitate control over the process of achieving goals. Minimize Waste / Redundancy Growth of trade union Reduce the Impact of Change

4 What Planning Accomplishes /Benefits of Planning
Allows decisions to be made ahead of time. Permits anticipation of consequences. Provides direction and a sense of purpose. Provides a unifying framework; avoiding piecemeal decision making. Improves competitive strength Achieves better coordination Helps identify threats and opportunities and reduces risks. Facilitates managerial control through the setting of standards for monitoring and measuring performance. Encourages innovation & creativity

5 Arguments Against Strategic Planning
Rigid Assumptions of Stability Environmental Turbulence Intuition and Creativity Focus on Today’s Competition Formal planning has been popular in business since the 1960s, but critics have observed the following: • Planning may create rigidity. Assuming that conditions will remain relatively stable, formal plans lock organizational units into specific goals and time frames. • Plans can’t be developed for a dynamic environment. Managing chaos and turning disasters into opportunities requires flexibility, not rigid, formal plans. • Formal plans can’t replace intuition and creativity. Developing strategy depends as much on intuition and creativity as it does on formal analysis. Because most successful strategies are visions, not plans, merely following a systematic framework will not yield incisive thinking. • Planning focuses a manager’s attention on today’s competition, not on tomorrow’s survival. Formal planning stresses capitalizing on existing opportunities, not reinventing or creating an industry. • Formal planning reinforces success, which may lead to failure. Success can breed failure. Since change is motivated by problems, success may not motivate managers to challenge the status quo. Preoccupation with Current Success

6 Does Planning Improve Performance?
Financial results Environmental concerns Quality and implementation The evidence is mostly positive and suggests several conclusions. 1. Formal planning in an organization is frequently associated with positive financial results. 2. In those organizations in which formal planning did not lead to higher performance, the environment was typically the culprit. 3. The quality of the planning process and the implementation of the plans affect performance more than does the extent of the plans.

7 Why Do Managers Plan? / Importance of planning
Purposes of Planning Planning is the primary management function that establishes the basis for all other management functions Planning establishes coordinated effort Planning reduces uncertainty Planning reduces overlapping and wasteful activities Manage complexities & competition Planning establishes goals and standards used in controlling To increase org effectiveness

8 Why Do Managers Plan? (cont.)
Planning and Performance Generally speaking, formal planning is associated with: Higher return on assets Higher profits Quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning External environment may undermine the effects of formal planning Planning/performance relationship is influenced by the planning time frame

9 Definition of Planning
Weihrich & Koontz “Planning involves selecting missions and objectives and the actions to achieve them; it requires decision making, that is, choosing from among alternative future courses of action”. McFarland “Planning may be broadly defined as a concept of executive action that embodies the skills of anticipating, influencing & controlling the nature &direction of change”. Terry “Planning is the selection & relating of fact & making & using of assumption regarding the future in the visualisation & formation of proposed activities believed necessary to achieve desired result.”

10 Features/ nature of planning
Planning is an intellectual process Planning determines the future course of action Primarily concerned with looking into future Involves selection of suitable course of action, means there are several alternatives for achieving objectives All levels are concerned with the determination of future course of action. Planning is the most basic to all mgmt functions Planning is pervasive function of mgmt Planning is flexible because future is always dynamic Planning is a pervasive & continuous managerial function involving complex processes of perception, analysis, conceptual thought, communication, decision,& action

11 Benefits of planning Reduces uncertainty
Encourage innovation & creativity Improves motivation Achieve better coordination Facilitates control Planning leads to success Focuses attention

12 Hierarchy Of Plans (1) Mission or Purposes, (2) Objectives or goals,
(3) Strategies, (4) Policies, (5) Procedures, (6) Rules, (7) Programs, and (8) Budgets Hierarchy Of Plans

13 Hierarchy of Plans (cont..)
Plans can be classified as (1) mission or purposes, (2) objectives or goals, (3) strategies, (4) policies, (5) procedures, (6) rules, (7) programs, and (8) budgets

14 Hierarchy of Plans (cont..)
The mission, or purpose, identifies the basic purpose or function or tasks of an enterprise or agency or any part of it Objectives, or goals, are the ends toward which activity is aimed Strategy is the determination of the basic long‑term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals Policies are general statements or understandings that guide or channel thinking in decision making Procedures are plans that establish a required method of handling future activities

15 Hierarchy of Plans – cont.
Rules spell out specific required actions or non actions, allowing no discretion Programs are a complex of goals, policies, procedures, rules, task assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action A budget is a statement of expected results expressed in numerical terms

16 Steps in Planning 1. Being Aware of Opportunities
2. Establishing Objectives or Goals 3. Developing Premises 4: Identify / Determining Alternative Courses 5. Evaluating Alternative Courses 6. Selecting a Course 7. Formulating Derivative Plans 8. Quantifying Plans by Budgeting

17 Being aware of opportunity :In light of Market, Competition Customer desire, Our strengths Our weaknesses Setting objectives or goals: Where we want to be& what we want to accomplish & when  Considering planning premises: In what environment will our plans operate  Identifying alternatives: What are the most promising alternatives to accomplishing our objectives  Comparing alternatives in light of goals sought Which alternative meets our goals at lowest cost &at highest profit  Choosing an alternative Selecting the course of action  Formulating derivative plans such plans as to :- Buy equipment Buy materials, Hire& train workers, Budgets: Develop such budgets as Volume & price of sales, operating expenses necessary for plans, Capital expenditure STEPS IN PLANNING  

18 Types Of Plans Frequency of Use Single use Standing Breadth Strategic
Operational Time Frame Long term Short term Specificity Directional Specific © Prentice Hall, 2002

19 Types Of Plans Types of Plans based on Breadth
strategic plans - apply to the entire organization establish organization’s overall goals seek to position the organization in terms of its environment operational plans - specify the details of how the overall goals are to be achieved tend to cover short time periods © Prentice Hall, 2002

20 Types Of Plans Types of Plans based on Time
long-term plans - time frame beyond three years definition of long term has changed with increasingly uncertain organizational environments short-term plans - cover one year or less Types of Plans based on specification specific plans - clearly defined with little room for interpretation required clarity and predictability often do not exist directional plans - flexible plans that set out general guidelines provide focus without limiting courses of action © Prentice Hall, 2002

21 Specific Versus Directional Plans
© Prentice Hall, 2002

22 Types Of Plans Types of Plans based on frequency of use
single-use plans - one-time plans specifically designed to meet the needs of a unique situation standing plans - ongoing plans that provide guidance for activities performed repeatedly include policies, procedures, and rules © Prentice Hall, 2002 7-22

23 Planning In The Hierarchy Of Organizations
Strategic Planning Operational Top Executives Middle-Level Managers First-Level Managers © Prentice Hall, 2002

24 Developing Plans (cont.)
Approaches to Planning traditional, top-down approach planning done by top managers formal planning department - specialists whose sole responsibility is to help to write organizational plans plans flowed down to lower levels tailored to particular needs at each lower level most effective if plan is a workable document used by organizational members for direction and guidance © Prentice Hall, 2002

25 Developing Plans (cont.)
Approaches to Planning (cont.) inclusive approach employees at each level develop plans suited to their needs employees acquire greater sense of the importance of planning when they participate in the process plans more likely to be used in directing and coordinating work © Prentice Hall, 2002

26 Principles of planning based on Purpose
and Nature Of Planning  . Principle of contribution to objectives: Purpose of every plan & all supporting plans is to promote accomplishment of enterprise objectives . Principle of objectives: If objectives have to be meaningful to people, they must be clear, attainable, & verifiable . Principle of primacy of planning.:... Planning logically precedes all other managerial functions . Principle of efficiency of plans: Efficiency of a plan is measured by the amount it contributes to purpose & objectives as offset by the costs required to formulate and operate it and by unsought consequences.

27 Principles--the Structure Of Plans
. Principle of planning Premises: The more thoroughly the individuals who are charged with planning, understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be . Principle of the strategy and policy frame work: The more strategies and policies are clearly understood and implemented in practice, the more consistent and effective will be the frame work of enterprise plans

28 . Principle of limiting factor: In choosing among
Principles--the Process Of Planning . Principle of limiting factor: In choosing among alternatives, the more accurately individuals can recognize and solve for those factors which are limiting or. critical to attainment of desired goals, the more easily and accurately they can select the most favorable alternative . The commitment principle: Logical planning should cover a period of time in the future necessary to foresee as well as possible, through a series of actions, the fulfillment of commitments involved in a decision made today

29 Principles--the Process Of Planning (Cont..)
. Principle of flexibility...:. Building flexibility into plans will lessen danger of losses incurred through unexpected events, but cost of flexibility should be weighed against its advantages . Principle of navigational change: The more that planning decisions commit individuals to a future path, the more important it is to check on events and expectations periodically and redraw plans as necessary to maintain a course toward a desired goal

30 Contingency Factors in Planning
Developing Plans Contingency Factors in Planning level in the organization operational planning dominates managers’ planning efforts at lower levels strategic planning more characteristic of planning at higher levels © Prentice Hall, 2002

31 Developing Plans (cont.)
Contingency Factors in Planning (cont.) degree of environmental uncertainty when uncertainty is high, plans should be specific, but flexible length of future commitments commitment concept - plans should extend far enough to meet those commitments made when the plans were developed the more that current plans affect future commitments, the longer the time frame for which managers should plan © Prentice Hall, 2002

32 Contemporary Issues In Planning
Criticisms of Planning 1. Planning may create rigidity unwise to force a course of action when the environment is fluid 2. Plans can’t be developed for a dynamic environment flexibility required in a dynamic environment can’t be tied to a formal plan 3. Formal plans can’t replace intuition and creativity mechanical analysis reduces the vision to some type of programmed routine © Prentice Hall, 2002

33 Contemporary Issues In Planning (cont.)
Criticisms of Planning (cont.) 4. Planning focuses managers’ attention on today’s competition, not on tomorrow’s survival plans concentrate on capitalizing on existing business opportunities hinders managers who consider creating or reinventing an industry 5. Formal planning reinforces success, which may lead to failure success may breed failure in an uncertain environment © Prentice Hall, 2002

34 Contemporary Issues In Planning (cont.)
Effective Planning in Dynamic Environments develop plans that are specific, but flexible recognize that planning is an ongoing process change directions if environmental conditions warrant stay alert to environmental changes © Prentice Hall, 2002

35 Barriers to effective planning
Difficulty of accurate premising Problems of rapid change Internal inflexibilities policy & procedural inflexibility capital investment External inflexibility political climate trade unions technology changes Time & cost factors Failure of people in planning

36 How Do Managers Plan? The Role of Goals and Plans in Planning
goals - desired outcomes provide direction for all management decisions represent the criteria against which actual work accomplishments can be measured plans - outline how goals are going to be met Types of Goals all organizations have multiple objectives no single measure can evaluate whether an organization is successful financial goals - relate to financial performance strategic goals - relate to other areas of performance 7-36

37 Stated Objectives From Large US Companies
© Prentice Hall, 2002 7-37

38 How Do Managers Plan? (cont.)
The Role of Goals and Plans in Planning (cont.) Types of Goals (cont.) stated goals - official statements of the organization’s goals real goals - those goals that an organization actually pursues © Prentice Hall, 2002

39 Establishing Goals Approaches to Establishing Goals
traditional goal setting - overall goals established at the top of the organization overall goals broken down into sub-goals for each level of the organization higher-level goals must be made more specific at lower levels network of goals creates a means-ends chain Sub-goals constrain subordinates’ behavior assumes that top managers know what is best for the organization © Prentice Hall, 2002

40 How Do Managers Plan? (cont.)
Establishing Goals (cont.) Approaches to Establishing Goals (cont.) management by objectives (MBO) - specific performance goals are jointly determined by employees and their managers progress toward accomplishing these goals is periodically reviewed rewards are allocated on the basis of this progress MBO consists of four elements goal specificity participative decision making explicit time period performance feedback © Prentice Hall, 2002 7-40

41 Traditional Objective Setting
Individual Employee’s Objective Top Management’s Department Manager’s Division “Increase profits, regardless of the means” “I want to see a significant improvement in this division’s profits” “We need to improve the company’s performance” “Don’t worry about quality: just work fast”

42 Steps in a Typical MBO Program
© Prentice Hall, 2002 7-42

43 Establishing Goals (cont.)
Approaches to Establishing Goals (cont.) management by objectives (cont.) increases employee performance and organizational productivity depends on support of top managers for MBO problems with MBO - can be useless in times of dynamic change -overemphasis on personal rather than organizational goals -may be viewed simply as an annual exercise in paperwork © Prentice Hall, 2002

44 Establishing Goals (cont.)
Characteristics of Well-Designed Goals should be written in terms of outcomes should be measurable and quantifiable should be clear as to a time frame should be challenging but attainable should be written down should be communicated to all organization members who need to know the goals © Prentice Hall, 2002

45 Establishing Goals (cont.)
Steps in Goal Setting 1 - Review the organization’s mission 2 - Evaluate available resources 3 - Determine the goals individually or with input from others should be congruent with the organizational mission and goals in other organizational areas 4 - Write down the goals and communicate them to all who need to know them 5 - Review results and whether goals are being met © Prentice Hall, 2002

46 Hierarchy of Goals FIGURE 4–1

47 Principles of Goal-Setting
Set SMART goals—make them specific, measurable, attainable, relevant, and timely. Choose areas (sales revenue, costs, and so forth) that are relevant and complete. Assign specific goals. Assign measurable goals. Assign doable but challenging goals. Encourage participation. Use executive assignment action plans, or management by objectives.

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